Inflation Message from CBRT Governor Karahan at Istanbul Investor Meeting

Governor of the Central Bank of the Republic of Turkey, Fatih Karahan, made assessments regarding the economy and monetary policy at the Citibank Turkey Investor Day held in Istanbul. Karahan stated that annual inflation fell to 31.5 percent in August and that the underlying trend is slowing down.

August Inflation Developments

Central Bank of the Republic of Turkey Governor Fatih Karahan announced that annual inflation dropped to the 31.5 percent level in August. Recent evaluations indicated a slowdown in the underlying trend of inflation.

Despite temporary fluctuations on a monthly basis, leading indicators continued to give positive signals.

Factors Affecting the Disinflation Process

While supply shocks pulled headline inflation upward, transportation and communication services slowed down the disinflation process. On the other hand, leading indicators showed that there is additional room for disinflation in rents.

Core goods inflation continued to maintain its moderate course despite all challenges.

Economic Activity and Growth Outlook

Despite a general slowdown in economic activity, quarterly growth gained momentum in the second quarter. Industrial production supported by external demand was the main driver of this increase.

High-frequency data revealed that the deceleration trend will continue in the third quarter.

Foreign Trade and Reserve Status

A noticeable improvement was recorded in the foreign trade balance in the third quarter, and tourism revenues maintained their strong course.

Despite negative external factors, the current account deficit remained flat while the robust structure of foreign exchange reserves was sustained.

Commitment to Tight Monetary Policy

Geopolitical risks and increases in energy prices created upward risks to the inflation outlook.

It was emphasized that the tight monetary policy stance will be maintained with determination until price stability is fully achieved.