Inflation expectations continue to improve, shows a survey

Inflation expectations continue to improve, shows a survey

ANKARA
Inflation expectations continue to improve, shows a surveyInflation expectations continue to improve, shows a survey

Inflation expectations of consumers and companies continued to improve in January, a survey by the Central Bank showed on Jan. 28.

The 12-month ahead inflation expectations of households declined from 63.14 percent in the December survey to 58.8 percent in the January survey.

Compared to May 2024, 12-month expectations improved by 17 points in households and 12 points in the real sector, Finance Minister Mehmet Şimşek commented on the latest numbers.

“Inflation expectations are critical to the pace of disinflation. We anticipate that expectations will further support the decline in inflation in the coming period,” Şimşek wrote on X.

He, however, noted that expectations are still high compared to the inflation outlook.

“With the program we are implementing with determination, we will permanently reduce inflation and increase the purchasing power of our citizens,” Şimşek said.

The proportion of households expecting a fall in inflation in the next 12 months increased by 4.5 points to 30.8 percent, according to the Sectoral Inflation Expectations survey.

Türkiye's annual inflation rate slowed for the seventh consecutive month in December 2024.

Consumer prices rose by 44.38 percent last month, down from 47.1 percent in November with the monthly inflation slowing from 2.24 percent to 1.03 percent.

Households’ 12-month inflation expectations have been on the decline steadily since September 2024.

The 12-month-ahead annual inflation expectations decreased by 1.7 points to 25.4 percent for market participants and by 3.8 points to 43.8 percent for the real sector in January, the bank said.

The Sectoral Inflation Expectations survey monitors the 12-month-ahead consumer inflation expectations of financial and real sector participants, manufacturing firms and consumers.

While inflation expectations and pricing behavior tend to improve, they continue to pose risks to the disinflation process, the Central Bank warned in a statement it released after the Monetary Policy Committee (MPC) meeting on Jan. 23.

As widely expected, the slashed its policy rate — the one-week repo auction rate — by 250 basis points to 45 percent.

The bank started the easing cycle in December 2024 by cutting the key rate from 50 percent to 47.5 percent which marked the first cut in nearly two years as inflation continued to slow.

While the underlying trend of inflation decreased in December, leading indicators point to an increase in January, the bank said after cutting the rate this month.

“This increase is mainly driven by services items with time-dependent pricing and backward indexation. Core goods inflation, however, remains relatively low,” it added.

Indicators for the last quarter suggest that domestic demand stands at disinflationary levels, the bank said.

The tight monetary stance will be maintained until price stability is achieved via a sustained decline in inflation, the bank reiterated in the statement accompanying the rate decision.

In the medium-term program, which covers 2025-27, the government forecast that inflation will decline to 17.5 percent at the end of 2025.