Central Bank leader acknowledges decreasing cost pressures due to demand
In a recent development, the Central Bank of Turkey has revised its expectations for the upcoming interest rate cut, following the higher-than-forecasted August inflation.
According to the bank's governor, Fatih Karahan, the monthly inflation rate last month was a sharper-than-expected 2.04 percent, which has led to a revision in the expectations for the Central Bank's rate cut next week. Initially, JPMorgan forecasted a reduction of 300 basis points, but now, the bank expects a reduction of 200 basis points instead.
Karahan stated that because monetary mechanism takes some time, estimates could diverge from the interim targets. He also mentioned that the breakdown of August's inflation numbers and second-quarter growth showed that demand-driven price pressures are easing.
The annual inflation in Turkey eased to 32.95 percent last month, which is a positive sign. The bank estimates that inflation will be between 25 percent and 29 percent by the end of 2025. The bank also expects annual inflation to decline to 24 percent at the end of this year and 16 percent by the end of 2026.
The Central Bank of Turkey will use official targets to determine the tightness of monetary policy in the current and near-term period. The bank is keeping a close eye on the impact of increases in rent and education on inflation expectations.
Despite the positive signs, private consumption in Turkey has been negative for two consecutive quarters. Karahan, however, stated that the main indicators of the underlying inflation trend offer a healthier assessment. He further stated that the Central Bank of Turkey has not allowed for the deterioration of inflation expectations nor for demand to disrupt disinflation.
The second-quarter GDP growth of Turkey was 4.8 percent, higher than the forecasts. This growth, coupled with the easing of inflation, suggests a positive outlook for the Turkish economy.
Karahan also suggested that investors may have been too hasty in reducing their forecasts for interest-rate cuts. He believes that the monetary mechanism takes some time to show its effects, and estimates could diverge from the interim targets.
In conclusion, the Central Bank of Turkey is taking a cautious approach to monetary policy, revising its rate cut expectations in response to the higher-than-forecasted August inflation. The bank is focusing on maintaining a stable inflation environment while promoting economic growth.
Read also:
- Understanding Hemorrhagic Gastroenteritis: Key Facts
- Stopping Osteoporosis Treatment: Timeline Considerations
- Trump's Policies: Tariffs, AI, Surveillance, and Possible Martial Law
- Expanded Community Health Involvement by CK Birla Hospitals, Jaipur, Maintained Through Consistent Outreach Programs Across Rajasthan
