Hafize Gaye Erkan: “The year-end inflation forecast was raised to 58 percent.”

Hafize Gaye Erkan

Hafize Gaye Erkan, the President of the Central Bank of the Republic of Turkey (CBRT), stated during the presentation of the third Inflation Report of the year that the 2023 inflation forecast has been revised from 22.3 percent to 58 percent.

Erkan also mentioned that they will begin to feel the cumulative positive effects of interest rate increases and the selective credit decisions by the end of 2023, especially in the second quarter of 2024, particularly in terms of the main inflation trend.

Hafize Gaye Erkan, the President of the Central Bank of the Republic of Turkey (CBRT), announced the third inflation report of the year.

Erkan stated that they have raised the 2023 Consumer Price Index (CPI) forecast from 22.3 percent to 58 percent. She also revealed the inflation forecast for 2024, which stands at 33 percent.

Erkan shared the following notes during the presentation.

“Our main goal is price stability. We have initiated a period of monetary tightening to reduce inflation, and we will gradually strengthen it as necessary and to the extent required.

We will continue to use all our tools decisively in line with price stability.

We have taken and will continue to take selective credit and monetary tightening decisions.

In the short term, inflation will show a temporary rise.

The effects of our interest rate increases will begin to be felt by the end of 2023, particularly in the second quarter of 2024, in the main trend of inflation due to the cumulative positive impact of our monetary and selective credit decisions.

The outlook for domestic demand and production indicates that overall demand conditions are at an inflationary level.

We expect that the selective credit tightening decisions will balance domestic demand.

In the second half of the year, we anticipate that the effects of monetary tightening will lead to a significant improvement in the current account through the services channel.

The process of monetary tightening will also support exchange rate stability.

Following the tightening, deposit interest rates have declined by 12 percentage points to 30 percent. We attach importance to ensuring that the deposit interest rate remains at a level that will not increase dollarization.

With the implementation of the reserve requirements, liquidity worth 450-500 billion TL will be withdrawn from the market.

As of July 14th, reserves increased by approximately 15 billion dollars to exceed 113 billion dollars.”

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