Turkey’s central bank governor Fatih Karahan said on Thursday that the bank maintained its previous inflation forecast for the end of this year, as it expects domestic demand to continue to weaken due to tightening monetary policy.
Turkey’s central bank governor, Fatih Karahan, said at a press briefing in Ankara held to release the bank’s third inflation report this year that annual consumer inflation is expected to reach 38% this year.
The PMA also kept estimates unchanged for next year at 14% and 9% for 2026, as announced in its previous report earlier this year. The steady outlook came after the central bank kept interest rates unchanged for four consecutive meetings.
“As we approach the end of the year, we were supposed to lower the forecast range for 2024. However, due to increased uncertainty amid recent geopolitical developments and global financial volatility, we have kept the forecast range between 34% and 42%.”
The governor touched on the bank’s recent steps to rein in inflation, recalling that the country has entered a period of deflation.
Read also:After a volatile week…the dollar stabilizes, awaiting the consumer price index
Since last year, Turkmenistan’s central bank has raised its key interest rate to 50% from 8.5% as officials begin to shift from previous monetary policy to low interest rates.
The annual inflation rate slowed to below 62% in July, representing a sharp decline compared to the June reading and the lowest level recorded since October last year.
Inflation expectations are constant. And the lira is falling
Explaining the reasons for the decision to keep inflation expectations steady, Karahan cited weak domestic demand and said that the medium-term outlook is “based on expectations in which a tight monetary policy stance is maintained until a significant and sustained improvement in inflation expectations is achieved.”
In his opening remarks, he touched on the broader global picture, noting that some advanced economies are starting to cut interest rates.
“Rapid rate cutting cycles are priced in various advanced economies, especially in the United States. In emerging economies, interest rate cuts have continued at a slower pace.”
One of the most important justifications for slowing the pace of rate cuts from central banks in emerging markets such as Turkey and others is to support the local currency and keep hot money within these countries to take advantage of the rising interest rate.
Meanwhile, the Turkish lira continues its decline against the US dollar, now recording 33.57 liras to the dollar, down about 0.24% on the day.
While the gram of gold denominated in lira is about 2623 liras, up by 1.3% during these moments of trading today.
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