CBRT: Current course poses an upside risk to the inflation outlook

In the summary of the 25 April 2024 Monetary Policy Committee (MPC) meeting, the Central Bank of the Republic of Turkey (CBRT) stated that given the recent consumer inflation realizations, there is a risk that inflation in certain services items may remain high for a while.

The report stated that the current course of inflation expectations poses an upside risk to the inflation outlook.

CBRT will publish the second “Inflation Report” of the year next week on 9th of May. Governor Fatih Karahan will make a presentation on the report and then answer questions.

In the summary of the MPC, it was explained that the interviews with firms in April implied that consumption expenditures were losing momentum due to the demand that had been brought forward in the previous quarter and the long holiday season.

“Leading indicators point out that the deceleration in the underlying trend of inflation continued in April,” the report said, “On the other hand, despite this slowdown, the underlying trend is slightly above the level envisaged in the Inflation Report”.

In the summary, it was stated that the annual increase in house prices remained below the inflation rate and added, “This situation in house prices is considered to be a factor that will restrain rent inflation in the upcoming period. On the other hand, the effect of the abolition of the regulation limiting the rent increase to 25 per cent in the near future on rent inflation will be closely monitored.”

In the report, it was stated that high-rated increases in private school fees were observed in education services, and it was assessed that: “Considering that this item, which is affected by wage developments as well as the high tendency to index to past inflation, will be reflected in the Consumer Price Index gradually until July, albeit at a decreasing rate depending on the price announcement dates, there is a risk of adversely affecting services inflation in the near term.”

In the summary, it was stated that communication services also showed high monthly increases led by mobile phone calls and internet charges, and added: “Communication services, which have historically displayed a moderate trend It is noteworthy that inflation reached 72 percent in March, which is also above the consumer inflation”.

In the summary, it was stated that the upside risks on catering services prices remained buoyant due to the ongoing high increases in red meat prices.