Disinflation expected to accelerate: Karahan

ISTANBUL

Disinflation is expected to accelerate in the coming period if supply-side pressures continue to fade, said Fatih Karahan, the Central Bank Governor.

Speaking at an event in Istanbul on Oct. 7, Karahan said the underlying inflation trend rose during the March-June period when the effects of the war became more pronounced but resumed its decline from July onward.

“On an annualized basis, the underlying trend, which climbed to around 30 percent during the war period, stood at 23.7 percent as of September. This level is approximately 6 percentage points below the current annual inflation rate,” he said.

Karahan said the fact that the underlying trend remains below annual inflation provides an important signal for the period ahead, adding that disinflation would continue at an accelerating pace if supply-side pressures ease.

He said the development reflects the impact of tight monetary policy on demand conditions and pricing behavior, adding that the disinflation process is expected to regain momentum as the effects of shocks diminish, supported by the central bank’s tight policy stance.

Karahan said the slowdown in domestic demand has become more evident thanks to tight monetary policy and noted that disinflation has been more pronounced in components directly affected by monetary policy.

“Inflation expectations and pricing behavior will remain important for the course of disinflation. In this framework, we will continue to use all our tools decisively in line with our objective of achieving price stability,” Karahan said.