The underlying trend of inflation is slowing down.
Quick Look
CBRT President Şahap Kavcıoğlu stated that inflation decreased to the annual level of 31.5% in August, its main trend slowed down and the foreign trade balance improved, but he noted that transportation and communication services slowed down the disinflation process and credit growth slowed down in all types.
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Why It Matters
CBRT Governor Şahap Kavcıoğlu evaluated inflation data and economic indicators in his presentation on inflation and macroeconomic outlook.
CBRT President Şahap Kavcıoğlu, in his presentation titled "Inflation and Macroeconomic Outlook", stated that annual inflation decreased to 31.5 percent in August.
"Despite monthly fluctuations, the latest inflation data and leading indicators indicate that the main trend of inflation is slowing down," Karahan said, adding that supply shocks pushed headline inflation up.
Noting that transportation and communication services also slowed down the disinflation process, Karahan said that leading indicators indicate that there is an additional area for disinflation in rents.
Emphasizing that core goods inflation maintained its moderate course despite significant difficulties, Karahan stated that productivity increase also accelerated during the disinflation process.
THE SLOWING DOWN IN ECONOMIC ACTIVITY WILL CONTINUE
Karahan pointed out that quarterly growth accelerated in the second quarter despite the slowdown in economic activity.
Stating that foreign demand, which is the driver of this increase, supports industrial production, Karahan noted that capacity utilization is below historical averages.
Stating that high-frequency indicators indicate that the slowdown will continue in the third quarter, Karahan said that loan growth slowed down in all loan types.
Karahan stated that inflation expectations also show that some caution should be taken.
FOREIGN TRADE BALANCE HAS IMPROVED
Emphasizing that the foreign trade balance showed further improvement in the third quarter, Karahan said that tourism revenues continued their strong course.
Stating that the current account deficit remains horizontal despite negative external factors, Karahan noted that domestic residents' demand for Turkish lira continues to remain strong.
Karahan also stated that foreign exchange reserves continue their strong course.
Open Questions
- When will inflation reach the target level?
- What will be the impact of slowing credit growth?
- How long will the productivity increase continue during the disinflation process?
