According to the forecasts of two leading economists, Turkey’s inflation is expected to fall in the coming months. AA Finance analyst Haluk Bürümcekçi said, “If the moderate course of exchange rates continues and there is no new shock in administered prices and commodity prices, inflation may start to slow down from September,” while Ankara Hacı Bayram Veli University Faculty Member Assoc. Prof. Dr. Levent Yılmaz predicts that inflation will fall more significantly in August and September after the temporary inflation increase in July.
ISTANBUL (AA) – SERAP DOGAN –Experts predicted that the decline in inflation would continue in the following months.
According to the Turkish Statistical Institute data, the Consumer Price Index (CPI) increased by 3.23 percent on a monthly basis in July, while the Domestic Producer Price Index (D-PPI) increased by 1.94 percent. Annual inflation was 61.78 percent in consumer prices and 41.37 percent in domestic producer prices.
AA Finance analyst and economist Haluk Bürümcekçi,In his assessment to AA correspondent, he stated that the upward effect of external factors on inflation has decreased significantly and said, “If the moderate course of exchange rates continues and no other shock is observed in wages, administered prices and commodity prices, the monthly inflation trend may start to slow down again as of September.”
Pointing out that the direction of global commodity prices, especially oil, will continue to be one of the main determinants of the course of inflation in the coming period, Bürümcekçi noted the following:
“The significant decline in the CRB all commodities index in July and the slowdown in the increase of 6.9 percent since the beginning of the year and around 2 percent in the last year in dollar terms mean that the upward effect of external inflationary pressures has weakened. In addition, the strong reverse dollarization trend and the continuation of foreign portfolio inflows, and the fact that the average increase in the currency basket remained limited to 1.4 percent in July, indicate that exchange rates continue to help the disinflation target.”
On the other hand, Bürümcekçi said that signs of domestic demand losing strength will make it difficult for producers to pass on cost increases to consumers.
Drawing attention to the fact that the deterioration in pricing behavior and the rigidity in service inflation continue, Bürümcekçi emphasized that the direct and indirect effects of the increase in natural gas prices for residential subscribers at the beginning of August on the CPI are expected to be around 1 point in total.
Bürümcekçi said that with the lagged effects of monetary tightening on credits and domestic demand and the continuation of the real appreciation trend in the TL, the main trend of inflation can be expected to slow down again from September, and noted that inflation could decline to 45 percent by the end of 2024.
Bürümcekçi stated that the tightening of monetary policy is expected to continue to contribute to the return to the disinflation path.
“Inflation needs to be below expectations in the following months for the year-end target.”
Ankara Hacı Bayram Veli University Faculty Member Assoc. Prof. Dr. Levent YılmazHe also stated that monthly inflation, which was below market expectations, was important in terms of managing expectations.
Referring to the process of managing expectations, Yilmaz said, “When we look at the sectoral inflation expectations that the Central Bank has been announcing since June, we see that the inflation expectations of the real sector and households are still well above the market participant survey. The main reason why the inflation expectations of households and the real sector are high is that the decline in the main trend of this monthly inflation has not yet been clearly felt by these two groups.”
Regarding the expectations of households, Yilmaz explained that the price increases were made up of housing, transportation and food, which account for 60 percent of the basket, and since these prices have been above the CPI average for a long time, household inflation expectations have been above the expectations of market participants.
Stating that they did not see the desired decline in real sector expectations, Yilmaz shared the following predictions:
“For a long time, the real sector’s inflation expectation has been stable at 55-56 percent. In this case, it means that the real sector, which makes the pricing, will continue to increase. In this respect, although we have temporarily seen an upward movement in inflation with the administered-guided price level in July, I evaluate that we will enter a more significant inflation decline process with the August and September inflation. One of the important points here is that in order to reach a year-end inflation that will approach the upper limit of 42 percent, which is the Central Bank’s inflation target of 38 percent at the end of this year, inflation must definitely be below expectations in the months following July, in August, September and October. In order to manage this process, the communication that the rate of increase in the exchange rate will remain at reasonable levels needs to be made more strongly. However, the Central Bank needs to emphasize frequently that there will be no concessions from the tightening program and that there will be no premature interest rate cuts.”
Dr. İsmet Demirkol, Founder of Pariterium ConsultancyHe said that in order to achieve the year-end inflation target of 42 percent, monthly inflation should fall to 1.60 to 1.70 percent.
Referring to the impact of developments abroad, Demirkol said, “The increase in global risks, the rise in geopolitical risks in the Middle East and the increase in the negative reaction in the export composition due to the slight contraction of the Eurozone, which is Turkey’s export market, will affect Turkey’s foreign exchange inflow. In addition to tourism revenue, the dollar/TL needs to be balanced by creating an economic foreign exchange inflow so that the inflation increase can be somewhat slowed down in the coming months.”
