Ferit PARLAK – ANKARA
The Central Bank (CBRT) updated its inflation forecasts upwards for the next 3 years. In the 4th Inflation Report of the year announced yesterday in Ankara, the inflation forecast for the end of 2024 was updated from 38 percent to 44 percent, the end of 2025 forecast was updated from 14 percent to 21 percent, and for 2026 from 9 percent to 12 percent. . The lower and upper points of the forecast ranges were announced as 42 and 46 percent for 2024, 16 and 26 percent for 2025, and 6 and 18 percent for 2026. Stating that inflation will reach 38 percent in March, CBRT President Fatih Karahan stated that there is a 3-month delay in the target and that this situation is not a serious deviation in the disinflation program of several years.
Why were the targets updated?
While explaining the reasons for the update, CBRT President Karahan pointed out that the recently high food prices had an impact of 1.6 points on the update of the 2024 year-end forecast and said, “The total impact of Turkish Lira-denominated import prices and demand conditions on our forecast update was half a point. The decline in expectations was slower than our predictions.” realization, initial conditions and the main trend of inflation increased our 2024 year-end forecast by 3.9 points. In the update, we calculate the total impact from our food prices, Turkish Lira-denominated import prices and managed price assumptions as 3.3 points. Additionally, the update in our 2024 forecast increased our 2025 year-end forecast by 3.5 points, thanks to inflation inertia and the main trend. “The impact of the update on the path on our 2025 forecast was 0.2 points.”
Tape funding is not a discount
Karahan explained, “Just as funding from the upper band is not an increase in interest rates, funding from the lower band should not be perceived as an interest rate reduction in any way.” Although Karahan said, “If the discount cycle starts, we will not take any steps that will disrupt the disinflation process or the return to the Turkish Lira,” Ali Hakan Kara, former chief economist of the CBRT, said in his message “The intention to start discounting with one step continues,” he said.
The daily premium in the Borsa Istanbul banking index also exceeded 5 percent. Speaking to Bloomberg, Strategy Portföy General Manager Burak İhsan Çetinçeker commented, “The stock market seems to perceive the statements of the CBRT President as an implicit signal of the interest rate reduction cycle that will start in December or January.” Economist Tufan Cömert, in his analysis shared on
‘There is a board on the minimum wage, we are not the decision makers’
Regarding a question about the minimum wage, Fatih Karahan also touched upon the news that appeared in the press recently and underlined that they did not say anything different than what they shared with the public behind closed doors, as claimed. Stating that they are not a part of the Minimum Wage Determination Commission, Karahan said, “It is out of the question for us to make a normative assessment such as ‘It should be like this’ on this issue, and it would not be correct. From where? We are not decision makers. There is a board, the board meets and has certain processes. “We are not a party to this board, and we do not make any official or unofficial recommendations,” he said.
Hatice Karahan: The slowdown in rent inflation continues
Hatice Karahan, Deputy Governor of the Central Bank of the Republic of Turkey, also pointed out that there are main sources of the forecast update and said: “One of them is the rigidity in services inflation. The fact that it is higher than we expected is due to rental inflation. There are some structural elements here, they stand out. Earthquake expenditures, previous such as price controls… That’s why we witnessed a slower development there, but when we look at the rental inflation indicators in the coming period, we see that the slowdown will continue because we look at many leading indicators and these indicators show us that there will be a gradual increase in rental inflation in the coming period. It shows that the recovery is coming. As you know, the other source of the forecast update was food prices. This is an element that is beyond the scope of monetary policy. We may need to differentiate the situation in terms of sectors. Different segments may be exposed to different inflation dynamics. That’s why we prefer to look at the course and direction of inflation expectations, not their level.”
Messages from Karahan:
* When we examine the indicators we follow within the CBRT as a whole, we see that the decline in the main trend of inflation continued in October.
* The high price increase in rents continued in the last quarter, due to the increase in the contract renewal rate in the third quarter. The decrease in reference rates used in rental agreements indicates that monthly rent inflation will slow down in the last quarter.
* Producer monthly inflation has been around 1.4 percent on average in the last three months. Therefore, the pressures on consumer inflation arising from producer prices are weakening.
If the prediction comes true, retirees will receive a raise of 11.2% to 15.5%
In the Medium Term Program, inflation for 2024 was above the Central Bank’s forecast with 41.5 percent. The Central Bank also revised its inflation forecast to 44 percent. If the year-end inflation is in line with the Central Bank’s forecast, the July – December period inflation will be 15.5 percent. Accordingly, if SSK and BAĞKUR pensions are not given a welfare share, there will be an increase of 15.5 percent in January. The increase in civil servant salaries and pensions in January will be around 11.2 percent. CBRT Deputy Governor Cevdet Akçay gave the message: “In the wage distribution, it is necessary to foresee that the increase will not harm inflation in order to prevent the wages of low-skilled employees from being damaged in the distribution.” Akçay said, “It is worth saying that at some point we must switch to forward-looking indexing. Forward-looking indexing has to come into play. “I believe that the conjuncture is suitable,” he said.
Source: www.dunya.com
