The disinflation process is expected to start once the base effect wanes and the global geopolitical conflicts are resolved, Central Bank Governor Şahap Kavcıoğlu has said.
“Steps were taken with determination to ensure price and financial stability also support this disinflation process,” Kavcıoğlu said in a speech he delivered at the bank’s annual general meeting.
Given this outlook, the bank has not changed the interest rate in the period of January-March, he noted.
The increase in inflation in the recent period is driven by rising energy costs resulting from the heightened regional conflict, temporary effects of pricing formations that are not supported by economic fundamentals, supply side factors, such as supply constraints, and demand developments, Kavcıoğlu said.
At the latest Monetary Policy Committee Meeting on March 17, the Central Bank kept the policy rate, which is the one-week repo auction rate, constant at 14 percent.
The bank is monitoring the cumulative impact of the recent policy, Kavcıoğlu added.
Consumer prices in Turkey increased by 4.8 percent month-on-month in February, while the annual inflation rate advanced to 54.4 percent in the month from 48.7 percent in January.
Kavcıoğlu reiterated that the comprehensive review of the policy framework continues with the aim of encouraging permanent and strengthened liraization in all policy tools of the Central Bank.
“The liraization strategy is one of the main elements of this review process,” he explained.
The bank governor also said the ongoing geopolitical developments are expected to have a limited impact on Turkey’s exports.
“Exporters’ ability to diversify products and markets is likely to compensate for the export losses which stemmed from the recent conflict and support the country’s export performance,” Kavcıoğlu said.
Hurriyet Daily News