Households’ inflation expectations ticked up in March

ANKARA

The 12-month-ahead annual inflation expectations decreased by 0.8 points to 41.1 percent for real sector and fell by 0.7 points to 24.6 percent for market participants in March compared to the previous month, a survey by the Central Bank showed on March 26.

Households’ 12-month ahead inflation expectations, however, ticked up by 0.1 points to 59.3 percent, according to the Sectoral Inflation Expectation survey.

“Although surveys do not reflect recent developments, we anticipate that the impact of volatility in financial markets on expectations will be short-term and limited,” commented Finance Minister Mehmet Şimşek on the Central Bank survey.

“We assess that the steps taken with the strong coordination of all our institutions and the tightening financial conditions will be disinflationary. We will resolutely implement our program until price stability is achieved,” Şimşek wrote on X.

The proportion of households expecting a fall in inflation in the next 12 months, compared to the previous month, increased by 3.0 points to 31.3 percent, said the Central Bank.

Türkiye's annual consumer price inflation rate eased for the ninth consecutive month, reaching 39.05 percent in February — the lowest level since July 2023, according to the latest official data.

In February, the Central Bank lifted its annual consumer inflation forecast for 2025 from the previous 21 percent to 24 percent, while keeping its forecast for 2026 unchanged at 12 percent.

Amid the volatility in the markets, the Central Bank held an unscheduled Monetary Policy Committee meeting (MPC).

Assessing the risks that these developments may pose to the inflation outlook, the committee took measures to support the tight monetary stance.

The committee decided to raise the Central Bank's overnight lending rate to 46 percent.

The policy rate — the one-week repo auction rate — and the Central Bank overnight borrowing rate were kept at 42.5 percent and 41 percent, respectively.

Monetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen, the bank said in a statement after the MPC meeting.

Furthermore, the Turkish Lira and FX liquidity measures have been introduced to limit market volatility, it noted, adding that in order to maintain the sound functioning of financial markets, additional actions will be taken if deemed necessary.

Sectoral Inflation Expectations are obtained by compiling the 12-month-ahead annual consumer inflation expectations of financial and real sector experts, manufacturing industry firms and households.