Economists interpret the Inflation Report
The Central Bank launched the second Inflation Report of the year. The bank has raised its year-end inflation forecast for 2024 by two points, from 36% to 38%, and kept its estimations for 2025 and 2026 steady at 14% and 9%, respectively. ►REVISION HAD TO BE MORE REALISTIC MURAT OZSOY
The fact that the bank kept the upper and of the forecast range at 42% for 2024 marginalized the upward revision. It should have been more realistic if a revision was on the carpet for 2024. The forecast for 2025 even had to be revised significantly. The slight revision contrasted with the discourse in the previous Inflation Report presentation, where it was stated that the important thing was to take the necessary measures to achieve the target rather than changing it. Should we now understand that the measures were insufficient to keep the target unchanged? The Central Bank couldn’t give a good account of credibility. It reached the peak policy rate, which it won’t additionally hike this year. No rate hike can be expected when the base-effect-driven disinflationary process begins. As we enter Q4, we will start discussing when the first rate cut will be. On the day the bank takes this step, it will continue accumulating reserves as a preparation against the possible rapid and upward fluctuations in USD/TRY so that they don’t adversely affect the fight against inflation. Inflation expectations haven’t been broken yet.
►NEED TO USE POLICY RATE CARD TO DECREASE HIKMET BAYDAR
An upward revision of two points is realistic. The monthly inflation data showed the necessity of the revision. The fact that the targets for 2025 and 2026 remain unchanged indicates the belief that inflation will be on the right track in the medium term. The bank estimates that inflation will peak at 75% in May and may end the year at 43%. It is in line with our expectations and is, therefore, realistic. In line with these targets, the need to use the policy rate card to curb inflation will decrease.
►BOLSTERS TRUST EMRE OZDEMIR
The bank highlighted the hike in food inflation and average oil price estimations for 2024 and the end of free monthly natural gas usage of up to 25 cubic meters among the reasons for the upward revision. The fact that correct and permanent steps have started to be taken in the fight against inflation, even if it is late, paves the way for foreign investors to be interested in Turkey again, in addition to local investors. The statement about additional tightening steps, if risks come to the agenda, has bolstered trust.