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Turkey Raises End-2023 Inflation Estimate to 65% from 58%

TURKEY
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  • The central bank has lifted its inflation outlook sharply higher for the next two years. Governor Erkan announced a new end-2023 estimate of 65% (Prior: 58%) and said price growth will finish next year at 36% (Prior: 33%), peaking at 70-75% in May. She added that she expects disinflation to begin in the second half of next year.
  • Other comments largely reflected previous rhetoric from central bank officials. She said tightening will continue until the outlook improves, while some indicators for prices in October point to a decline in the underlying trend of monthly inflation.
    • Her full speech can be found here.
  • The central bank also introduced new measures to encourage saving in TRY. The latest changes make it more expensive for commercial lenders to offer accounts denominated in hard currency or linked to foreign exchange rates, according to new regulation published in the Official Gazette. Banks are now required to hold a higher amount of reserves at the monetary authority for FX-linked deposits they offer to consumers, with the increase in costs likely to discourage lenders from promoting the KKM accounts.
  • Erkan cited data which shows that the share of TRY in total deposits has increased by 5ppts in the past 8 weeks as evidence of the success of previous measures.
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  • The central bank has lifted its inflation outlook sharply higher for the next two years. Governor Erkan announced a new end-2023 estimate of 65% (Prior: 58%) and said price growth will finish next year at 36% (Prior: 33%), peaking at 70-75% in May. She added that she expects disinflation to begin in the second half of next year.
  • Other comments largely reflected previous rhetoric from central bank officials. She said tightening will continue until the outlook improves, while some indicators for prices in October point to a decline in the underlying trend of monthly inflation.
    • Her full speech can be found here.
  • The central bank also introduced new measures to encourage saving in TRY. The latest changes make it more expensive for commercial lenders to offer accounts denominated in hard currency or linked to foreign exchange rates, according to new regulation published in the Official Gazette. Banks are now required to hold a higher amount of reserves at the monetary authority for FX-linked deposits they offer to consumers, with the increase in costs likely to discourage lenders from promoting the KKM accounts.
  • Erkan cited data which shows that the share of TRY in total deposits has increased by 5ppts in the past 8 weeks as evidence of the success of previous measures.