CBRT Announced Its Annual Inflation Forecast

CBRT announced its annual inflation forecast. The Central Bank stated that annual inflation may be trending upwards.

Central Bank of the Republic of Turkey (CBRT) has released the summary of its Monetary Policy Committee meeting in January. In the summary of the meeting, it was stated that annual inflation may go up for a few more months. Regarding the issue, the CBRT stated the following; "... developments in international commodity prices, wage and managed price adjustments made with apparent supply constraints in some sectors are still important on the medium-term inflation outlook. Although the lagged effects of the slowdown in loans are expected to become evident in the upcoming period, they are quite effective in the short term. It is assessed that annual inflation may go up for a few more months due to supply-side inflationary factors.” In the meeting summary, where it was stated that the downside effects of the restrictions applied due to the new type of coronavirus (Covid-19) epidemic on the economy were more limited compared to the second quarter of last year, it was noted that the slowdown in services and related sectors and the uncertainty regarding the short-term outlook of these sectors continued. In addition, it was pointed out that the negative impact of domestic demand on the current account balance, which was strengthened by the cumulative effects of high credit growth during the coronavirus epidemic period. In the summary of the meeting, it was noted that domestic demand conditions, cumulative cost effects, especially the exchange rate, the rise in international food and other commodity prices and high levels of inflation expectations continued to negatively affect the pricing behavior and inflation outlook. In addition, it was stated that the tight monetary policy stance will act as an important buffer against external factors, temporary volatility in the context of inflation expectations, pricing behavior and financial market developments.