Central Bank stresses ‘core inflation’

Dünya Executive - - COMMENTARY -

We should mention that the Central Bank’s Monetary Policy Committee gave a different statement after its most recent meeting – and the emphasis made on core inflation was the most significan­t change.

In its previous statement, the central bank had said: “The high levels of inflation pose a risk for pricing behaviors.” But this time the statement included the expression, “High levels of inflation and improvemen­ts regarding core inflation indicators pose a risk for pricing behaviors.” So the regarding core inflation concern was specifical­ly implied. To define core inflation as “the permanent part of inflation when temporary effects are eliminated” would not be wrong. Therefore, the central bank needs to emphasize the permanent part. In addition, the central bank utters its discontent on high trend of inflation as usual and draws attention to core inflation by using the classical expression: “Within this framework committee has decided to maintain its tight monetary policy stance.”

The absent sentence

An expression always used in the committee’s statements did not feature in this one. All relatively recent previous statements carried the remark: “Economic activity is expected to continue recovering with the supportive measures and incentives taken.” But the expression is nowhere to be seen in the most recent statement. It’s understood that after Turkish economy grew by respectabl­e rates in the first and second quarters, there was no further need for this classical expression.

The class cal paragraph

One particular classical paragraph, which reflects the central bank’s general stance, almost never changes in the Monetary Policy Committee’s statements. This paragraph basically says “Interest rates won’t fall, without inflation rate falling.” The whole paragraph is as follows: “The Central Bank will continue to use all its tools in line with its fundamenta­l goal, price stability. The tight monetary policy stance will continue until there is a significan­t recovery in inflation outlook. Improvemen­ts regarding inflation expectatio­ns, pricing behaviors and other elements influencin­g the inflation will be closely monitored and additional monetary tightening will be pursued when needed.”

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