Underlying inflation trend started to decline: Central Bank

ISTANBUL

The underlying trend of inflation has started to decline, and the inflation will decrease in the second half of 2024 after reaching its peak, Central Bank Governor Hafize Gaye Erkan has said.

"The biggest risk to sustainable growth is asset price volatility driven by high inflation, making the fight against inflation more important than ever,” Erkan said on Nov. 29 at a meeting organized by the Istanbul Chamber of Industry (ISO).

“It is of the utmost importance that disinflation be given priority. The prerequisite for fighting inflation is determination,” she added.

The underlying trend in inflation has also started to decline, Erkan noted.

“Leading indicators for November show that inflation continues to fall,” she said.

“After peaking, inflation will decline in the second half of 2024. With the contribution of exchange rate stability, shocks to monthly inflation will decrease and cost predictability will increase. The decline in prices of durable goods and products will continue across the board. We see the rebalancing of demand as the key to progress.”

The Central Bank governor said that the focus will be on quality growth.

“Price stability, and the financial stability that goes with it, is a sine qua non for sustainable growth,” Erkan added.

“When inflation is high and volatile, disinflation can be initiated with the right policies until inflation falls to a certain level. The aim should be to continue the disinflation process resolutely.”

Erkan emphasized that it will take time for the monetary policy actions to produce their intended results, but the positive effects of the recent actions are being seen.

“The normalization of retail lending has begun,” she said.

“Waste and inflationary excesses in retail loans have been eliminated. Commercial loans have reached a balanced structure. There has been a significant increase in rediscount and investment commitment loans, which contribute significantly to the targeted direction.”

Erkan said it was time to switch to Turkish Lira.

“As of Nov. 17, gross international reserves exceeded $134 billion, the highest level in the last nine years, driven by Western fund inflows,” she said.

“We will make the increase in reserves permanent. Demand for fixed deposits has increased, it is time to switch to the Turkish Lira. Investor confidence in Türkiye contributes significantly to financial conditions and exchange rates. Thanks to our monetary tightening and simplification steps, the yield curve has normalized and domestic and foreign interest has increased significantly.”