CBRT President Karahan Spoke on Inflation and Macroeconomic Outlook

CBRT President Karahan made a presentation titled "Inflation and Macroeconomic Outlook" within the scope of the 19th Turkey Investment Conference organized by DEİK Turkey-US Business Council (TAİK) in New York.

Stating that the latest data should be interpreted carefully, Karahan stated that supply shocks have a significant impact on headline inflation and services inflation continues to show rigidity.

Karahan, however, reported that this table varies significantly among service components.

Stating that there has been a significant improvement in items that normally show more rigidity, especially rents, Karahan emphasized that the slowdown in rent inflation and demand supports the disinflation process.

Karahan, on the other hand, noted that transportation services, which have been more affected by recent developments, offset some of this improvement.

Stating that growth slowed down due to the weakening of domestic demand, Karahan said:

"Taken as a whole, the data point to a continuation of the disinflation process despite more challenging supply conditions. Understanding these distinctions is important for assessing both the inflation outlook and our monetary policy stance. While monthly data alone is informative, it can also be volatile. Our policy assessment must look beyond those fluctuations while continuing to pay attention to changes in the underlying trend."

FOREIGN TRADE BALANCE IMPROVED AND TRAVEL REVENUES MAINTAINED ITS STRONG TRUE

CBRT President Karahan stated that while geopolitical developments increased oil prices, the expansion in refinery margins caused this effect to become more pronounced.

Emphasizing that they tightened monetary policy in order to limit the risks regarding the inflation outlook, Karahan explained that the foreign trade balance has improved and travel revenues maintain their strong course.

Karahan reported that credit growth has slowed down significantly since the spring.

Stating that the quarterly recovery in economic activity was supported by strong exports, Karahan stated that the slowdown in domestic demand and strong exports supported the improvement in the current account balance.

Karahan stated that high-frequency data indicate that the slowdown in domestic demand will continue in the third quarter.

Stating that the increase in energy prices increases inflation through both direct and indirect channels, Karahan noted that when the data are evaluated as a whole, there has been a slowdown in the main trend of inflation recently.

Emphasizing that inflation expectations require continued cautious behavior, Karahan said, "Domestic residents' demand for the Turkish lira remains strong. International reserve buffers continue their strong course. External shocks and domestic transmission mechanisms will determine the course of inflation in the coming period." he said.