CBRT President Karahan Spoke on Inflation and Macroeconomic Outlook

Karahan made a presentation titled "Inflation and Macroeconomic Outlook" at the Citibank Türkiye Investor Day held in Istanbul.

Stating that annual inflation decreased to 31.5 percent in August, Karahan stated that supply shocks pushed headline inflation up.

Karahan noted that transportation and communication services also slowed down the disinflation process.

Stating that leading indicators indicate that there is an additional area for disinflation in rents, Karahan emphasized that core goods inflation maintains its moderate course despite significant difficulties.

CBRT President 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 stated that the increase in productivity accelerated during the disinflation process.

Karahan noted that capacity utilization was 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 also stated that inflation expectations show that some caution should be taken.

Foreign trade balance showed further improvement in the third quarter

Emphasizing that the foreign trade balance showed further improvement in the third quarter, Fatih Karahan said that tourism revenues continued their strong course.

Karahan emphasized that the current account deficit remained horizontal despite negative external factors.

Noting that the Turkish lira demand of domestic residents continues to remain strong, Karahan stated that foreign exchange reserves continue their strong course.

"Despite monthly fluctuations, the latest inflation data and leading indicators indicate that the main trend of inflation is slowing down," said Karahan, adding that the data on economic activity and the limited reflection of supply shocks on domestic prices confirm the weak course of domestic demand.

Karahan stated that rising energy prices due to geopolitical developments pose an upward risk on the inflation outlook and said, "The tight monetary policy stance to be maintained until price stability is achieved will strengthen the disinflation process through demand, exchange rate and expectation channels." he said.

Emphasizing that the CBRT Monetary Policy Board will determine the steps to be taken regarding the policy rate, taking into account inflation realizations, main trends and expectations, in line with the intermediate targets and ensuring the tightness required for disinflation, Karahan stated that monetary policy decisions are taken with an inflation outlook-oriented, meeting-based and cautious approach.

Karahan added that the monetary policy stance will be tightened if the inflation outlook deviates significantly from the intermediate targets.