In a comprehensive briefing session held in Ankara, the Central Bank Governor, Hafize Gaye Erkan, addressed key members of the press and attendees, discussing the monetary policies and strategies in the face of current economic challenges.
The Governor commenced her speech by acknowledging the centennial celebrations of the Republic of Türkiye and emphasized the essential role that the Central Bank plays in achieving the country's economic goals.
Erkan articulated the institution's primary objective of establishing a disinflation course and lowering inflation to single-digit figures, aligning with their price stability objectives.
Stressing the pivotal role of the Central Bank in fostering social welfare through price stability, Erkan noted the determined approach toward combating inflation. She highlighted the significant impacts of the bank's policies on various financial aspects such as interest rates, lending, currency markets, and reserves.
Global Economic Overview and Inflation
The Governor detailed the global economic landscape, highlighting the persistent weakness in economic activities observed worldwide, particularly in the export partners of Turkey. A downward trend in manufacturing activity and the services sector was noted in both advanced and emerging economies, including the Eurozone and China.
Erkan pointed out the significance of oil prices as a crucial factor contributing to energy price volatility and highlighted the uncertainties surrounding the oil price forecasts from international institutions and organizations.
While global inflation has seen a notable decline from its earlier highs, Erkan emphasized that the struggle against inflation varies across different economies. Advanced economies continue to maintain a tight monetary policy due to persisting labor market conditions and core inflation.
Domestic Economy and Inflation
Focusing on the inflation scenario in Türkiye, Erkan outlined the drivers behind the significant surge in consumer inflation, attributing the sharp rise to multiple simultaneous shocks. Key contributors to the inflation hike included fuel prices, currency fluctuations, tax adjustments, and changes in administered prices.
The Governor discussed the country's domestic demand trends, indicating a robust yet gradually receding excess demand, especially noticeable in the automobile and white goods sector. Various indicators suggested the persistent inflationary conditions despite a slight deceleration in demand, reflecting the current imbalance.
Erkan highlighted the importance of re-anchoring inflation expectations, underscoring the Central Bank's communication strategy and the need for consistency in policy decisions to shape expectations.
Monetary Policy and Medium-Term Projections
Detailing the monetary policy strategy, Erkan expounded on the comprehensive tightening measures adopted by the Central Bank, including rate hikes, quantitative tightening, and selective credit policies. She elucidated the preliminary positive impacts of these policy measures on deposit rates, credit growth, and market stability.
The Governor shared revised medium-term inflation forecasts for 2023, 2024, and 2025, acknowledging uncertainties related to geopolitical risks and administered prices. She discussed the expected temporary rises in inflation and the subsequent disinflationary process projected for the latter half of 2024.
Erkan reiterated the commitment to deploying all available tools until inflation achieves single-digit levels and maintains a medium-term target.
The Governor concluded by expressing gratitude to participants and colleagues involved in preparing the report and briefing.
This insightful briefing by the Central Bank Governor presents a comprehensive overview of the economic challenges facing Türkiye, outlining the strategies employed by the institution to navigate the complex economic landscape and achieve the country's inflation targets and economic stability. (ILKHA)