Turkey’s central bank raises year-end inflation forecast by two points to 38 pct

Turkey’s Central Bank Governor Fatih Karahan announced that the bank raised its year-end inflation forecast by two points to 38 percent at the meeting where the second inflation report of the year was released.

Thursday May 09 2024 01:50 pm

Duvar English

The Central Bank on May 9 announced that it increased Turkey's inflation forecast for the end of 2024 by two points to 38 percent.

In a presentation to introduce the second inflation report of the year, Governor Fatih Karahan stated that they revised their forecasts from 36 percent in the previous report.

"We are determined to maintain our tight monetary policy stance until inflation falls to levels consistent with our target. We will definitely not allow a permanent deterioration in the inflation outlook,” Karahan noted.

The bank left its year-end inflation forecasts of 14 percent for 2025 and nine percent for 2026 unchanged.

Karahan stated that inflation would reach its peak in May and the country will enter a disinflation period for the rest of the year.

Turkish annual consumer price inflation climbed to 69.8% in April, official data showed on May 3, a bit below expectations but the highest since late 2022 on strong rises in education, restaurant and hotel prices.

The governor attributed the rising inflation to the high increase in the services sector compared to other branches, "Although services inflation is slowing down on a monthly basis, it follows a high course. In both the USA and the euro area, services inflation is significantly above the headline inflation and the targets."

Karahan stated that the transition from FX deposits to lira deposits has accelerated and said, "In the last eight months, the share of lira deposits increased from approximately 32 percent to 44 percent, while the share of Exchange Rate Protected Deposits decreased from 26 percent to 14 percent."

In April, Turkish lira deposits increased by 539 billion liras, while parity-adjusted FX deposits and FX-protected deposits decreased by 6.2 billion dollars and 19 billion Turkish liras, respectively.