Households’ 12-month ahead inflation expectations steady

ANKARA

Households’ 12-month ahead inflation expectations remained unchanged from March to stand at 59.3 percent, the Central Bank’s Sectoral Inflation Expectations survey showed on April 25.

The proportion of households expecting a fall in inflation in the next 12 months, compared to the previous month, decreased by 4.1 points to 27.2 percent, the bank said.

Households’ 12-month ahead inflation expectations were 58.8 percent in January, 59.2 percent in February.

However, market participants’ 12-month ahead inflation expectations increased by 1 point to 25.6 percent, while rose by 0.6 points to 41.7 percent for the real sector, according to the survey.

The Sectoral Inflation Expectations are obtained by compiling the 12-month-ahead annual consumer inflation expectations of financial and real sector experts, manufacturing industry firms and households.

The annual inflation rate slowed to 38.1 percent in March, marking its lowest level since December 2021, the latest data from the Turkish Statistical Institute (TÜİK) showed.

At a presentation he made in Washington earlier this week on the monetary policies and inflation outlook in Türkiye, Central Bank Governor Fatih Karahan said that disinflation continues but warned that risks are alive.

The underlying inflation indicators point to ongoing disinflation, according to Karahan.

Goods inflation is low but will be affected by FX pass-through, demand has exceeded expectations, driven by goods consumption, the governor furthered.

The FX pass-through is modest, reflecting improvement in pricing behavior, he said.

“The FX pass-through is expected to be around 35-40 percent, considerably lower than that during the summer of 2023,” said Karahan at the presentation.

Falling oil prices support disinflation, but the global economic outlook is uncertain, Karahan added.

In February, the Central Bank raised its year-end inflation forecast for 2025 from a previous 21 percent to 24 while keeping it unchanged at 12 percent for 2026.