April saw a limited decline in the underlying trend of monthly inflation. Recent indicators, however, point to a slowdown in domestic demand compared to the first quarter. This slowdown comes amid an increase in consumption goods imports in April, which has limited the improvement in the current account balance. Despite these trends, high levels of services inflation, persistent inflation expectations, geopolitical risks, and rising food prices continue to exert inflationary pressures, the Committee said in a press release.
The Committee, chaired by Governor Yasar Fatih Karahan and comprising members Osman Cevdet Akcay, Elif Haykir Hobikoglu, Hatice Karahan, and Fatma Ozkul, is closely monitoring the effects of monetary tightening on credit conditions and domestic demand. Due to the lagged effects of previous monetary tightening, the decision was made to keep the policy rate unchanged. However, the Committee remains vigilant regarding inflation risks. The current tight monetary stance will be maintained until a significant and sustained decline in monthly inflation is observed, and inflation expectations align with the projected forecast range.
The Committee has indicated that the monetary policy stance will be tightened further if a significant and persistent deterioration in inflation is foreseen. A decisive approach towards a tight monetary stance is expected to bring down the underlying trend of monthly inflation through moderation in domestic demand, real appreciation in the Turkish lira, and improvement in inflation expectations. This strategy is projected to establish disinflation in the second half of the year.
As part of efforts to simplify the macroprudential framework and enhance market functionality, the securities maintenance practice has been terminated. With recent developments in credit growth and deposits in mind, additional measures will be implemented to preserve macro financial stability and support the monetary transmission mechanism. The excess liquidity arising from the increased domestic and foreign demand for Turkish lira financial assets will be sterilised through additional measures.
Considering the lagged effects of monetary tightening, the Committee will ensure that monetary and financial conditions necessary for a decline in the underlying trend of inflation and the achievement of the medium-term 5 per cent inflation target are established, the release added.
Fibre2Fashion News Desk (KD)