“The CBRT) of the Republic of Turkey (CBRT) sent to the government in the letter,” In the coming period, policy interest, inflation realization, main trends and expectations considering the foreseen disinfelation process will be determined in a way to provide the firmness required. ” expression.
The Central Bank sent a “open letter” to the Treasury and Finance Minister Mehmet Simsek on behalf of the government.
In the letter, in accordance with Article 42 of the Central Bank Law No. 1211, the CBRT’s reasons for the deviation from the target and the measures to be taken in writing to the government in writing and explain to the public.
In the letter pointed out that the uncertainty range of 2024 inflation was significantly above the target, the reasons for the deviation of inflation from the target and the measures to be taken to reach the target were explained.
The letter included the following statements:
“In the course of consumer inflation in 2024, the impact of past inflation indexing behavior was prominent. Inflation expectations showed high levels of decrease throughout the year, but in the first half of the year, the relatively strong demand conditions contributed to the upward direction in inflation, while the third quarter of the year is in the direction of reducing inflation from the third quarter of the year. In addition, real valuation in Turkish lira supported the decline in influence.
After the commodity prices rise until April, the rest of the year tended to decline in general. In the first months of the year, the decline of the producer inflation in the rest of the year and the pressures caused by producer prices have weakened. Domestic producer prices increased by 28.5 percent in 2024 and has been a element that limits basic goods inflation in CPI. Depending on these developments, the annual consumer inflation, which completed the year 2023 at 64.8 percent, decreased to 44.4 percent at the end of 2024 years. “
“The highest contribution to consumer inflation came from service prices”
The letter said that the highest contribution to consumer inflation came from service prices.
In some service sectors, price adjustments were made with a certain delay according to inflation, the following recorded:
“These items are one of the reasons for the continuation of the inertia in service inflation. In this context, rent and training items have come to the fore. Inflation, which is of great importance in determining the rent increase rates, has also increased the rent inflation of the housing sector. Thus, rent inflation, other service It is another element that has been decomposed from its items in terms of both level and inertia, which has a high -tendency to index on inflation.
On the other hand, inflation was more moderate in some service items that are sensitive to demand conditions such as restaurant-hotel, entertainment-cultural, package tour in the second half of the year. The inflation of goods, which is relatively low indexing behavior to the past, was lower than service inflation. As a matter of fact, basic goods inflation, which is relatively high in exchange rate and demand conditions, has been more moderate, especially durable consumer goods. However, in the group of goods, energy and inflation in unprocessed food items are decomposed with a high course. “
In the letter, it was emphasized in the energy group that the application of 25 cubic meters of natural gas for dwellings affected inflation in 2023 in 2023 and affected inflation in 2024 with the end of the application.
In 2024, the only main expenditure group that increased inflation in 2024 with the reflection of the base impact was energy in the letter, “In the food group, fresh fruit and vegetable prices are highly sensitive to supply conditions and the relatively impact of monetary policy is outside the area of fresh fruit and vegetables. It has increased significantly over inflation realization and adversely affected their expectations. ” evaluated.
“The main purpose and priority of the CBRT is to ensure price stability”
In the letter, the CBRT’s stance of monetary policy over 2024, taking into account the main tendency of monthly inflation and inflation expectations, stressed that the foreseen disinfelation process requires the tightness required.
In this context, the CBRT’s policy interest, which was 45 percent at the end of 2023, took into account the deterioration in the inflation appearance to 50 percent in March 2024, the letter reminded that the following information:
“The CBRT maintained its stunned and strict monetary policy stance during the April-November period and kept its policy interest at a level of 50 percent. The CBRT brought its policy interest to 45 percent in January 2024 and 2025 to 45 percent. In the main tendency of inflation, the impact of the demands of the demand for supporting and the decrease in pricing behaviors and expectations have been implemented in 2024 in order to support and increase the effectiveness of the monetary transfer.
In the total deposits, regulations such as the increase in the share of the Turkish Lira deposits and the transition targets of transition from KKM accounts to Turkish Lira accounts strengthened the transfer of monetary policy in this period. The transfer mechanism was supported by regulations for loan growth and fluctuations in credit demand were prevented. In addition, as a step of simplification, the regulation of securities has been repealed. With the steps of liquidity policy, the management of the excess Turkish lira liquidity in the system is provided. “
In the letter, the determined stance in monetary policy, balancing domestic demand, real valuation in Turkish lira and inflation expectations by means of improvement reduced the main tendency of monthly inflation and the disinflation process is clearly reported.
The main purpose and priority of the CBRT is to ensure the stability of the price in the letter, the following recorded:
“Monetary policy will be established for this purpose. One week of the repo tender interest rate will continue to be a policy interest rate. Strict monetary policy stance will be maintained until permanent decrease in inflation and price stability will be maintained. Policy interest, inflation realizations, main tendencies and expectations in the coming period In the event of a significant and permanent deterioration in the disinflation process required by the disinflation process, monetary transmission mechanism will be used in the case of additional macroiqs.
“Sterilization tools will continue to be used effectively by closely monitoring the conditions of liquid.”
In the letter, “Liquidity conditions closely monitored to continue to be used effectively.” said.
Under the strict monetary policy stance and strong policy coordination, the letter emphasized that inflation is expected to convert gradually to the medium -term target of 5 percent.
“70 percent of inflation, at the end of the year 2025, the middle point is 24 percent (19 percent to 29 percent), at the end of 2026 at the end of the year 12 percent (6 to 18 percent), at the end of 2027 at the end of the middle point 8 percent (2 to 14 percent) It is foreseen that it will be realized as a risk element of the disintegration of the disinflation. It keeps the risks on inflation alive. “
In the letter stated that the coordination of money and finance policies in the disinflation process is of great importance, the assumptions of public policies embodied by the medium-term program (MTP, 2025-2027), which enabled the predictability, were reflected in the inflation forecasts of the CBRT.
“In 2025, the fiscal policy will be supportive in the fight against inflation by determining the prices and wage and tax adjustments in 2025 within the framework of the MTP targets.” By saying, the following statements were used:
“On the other hand, in the medium and long term, the continuation of structural reforms that will reduce the rigidity and volatility in inflation and strengthening the measures to increase supply capacity will contribute positively to price stability and social welfare. It will continue to work on the importance of the struggle and to create awareness of the relevant stakeholders and the medium-term forecasts on our website on February 7. The ‘2025 Monetary Policy’ text, which explains the monetary policy to be applied to achieve its goal, is presented to your knowledge. “
