Central Bank raises inflation forecasts

ANKARA

The Central Bank has raised its year-end inflation forecast from a previous 58 percent to 65 percent, while lifting the end-2024 forecast from 33 percent to 36 percent.

The annual inflation rate quickened from 58.9 percent in August to 61.5 percent in September.

"We are decisively fighting with inflation via the strong monetary tightening that we initiated in June,” said Governor Hafize Gaye Erkan, presenting the bank’s quarterly inflation report in Ankara.

The bank also revised the year-end forecast for 2025 to 14 percent. The previous forecast for 2025 was 15 percent.

“We will continue monetary tightening until significant improvement in inflation outlook is observed,” Erkan said, adding that the effects of the monetary tightening process will be seen in 2024, when disinflation will be established.

The Central Bank hiked its policy rate, the one-week repo auction rate, by 500 bps last month to 35 percent.

Since June, the bank has lifted the policy rate by a cumulative 2,650 bps.

During the disinflation period, exchange rate stability, improvement in the current account balance, lasting increase in capital inflows and an increase in reserves will continue, Erkan said yesterday.

“Disinflation period will be followed by the stability period in which predictability will increase, inflation will come down to single digits, and high-quality growth and disinflation will be achieved permanently.”

The structure and balancing of demand are the main factors that drive the rise in inflation and play a critical role in establishing disinflation through monetary tightening, she said.

But some indicators show that the excess demand is gradually fading out, Erkan said, noting that automobile and white goods sales remained above their historical averages in the third quarter, but decelerated on a quarterly basis.

“The joint analysis of the domestic demand and production outlook suggests that aggregate demand conditions are still inflationary despite the loss of momentum.”

October inflation data

The Turkish Statistical Institute (TÜİK) will release the nationwide inflation data for October tomorrow.

Meanwhile, the Istanbul Chamber of Commerce (İTO) reported that retail prices in the city rose by 3.69 percent month-on-month in October, easing from the 5.46 percent rise in September.

Consequently, the annual increase slowed from 73.2 percent to 72.7 percent.

Food prices in Türkiye’s largest city rose by 4.3 percent monthly, while housing costs were up 1.8 percent. Clothing prices increased more than 15 percent in October from the previous month. Transport and communication costs, however, fell 2.3 percent.