Turkey sees price behavior returning to normal (CBRT governor)
The governor of Turkey’s central bank said on Tuesday that he expects price behavior to return to normal as the effects of the coronavirus pandemic abate, adding that the bank will continue to take the measures policies needed to support standardization.
Speaking at the Future of Finance Summit, hosted by Turkuvaz, the parent company of Daily Sabah and its broadcaster A Para, Şahap Kavcıoğlu said world food prices have shown sharp increases and the continuing drought and production conditions had a negative impact on prices.
Turkey is among the countries where food prices have risen the most, which Kavcıoğlu says would decline as the composition of demand normalizes, supply restrictions eased and base effects decoupled.
“These elements will also have a downward effect on inflation in our country in the coming period,” added the governor.
The annual increase in consumer prices in Turkey accelerated to 19.25% in August, above the key rate of the Central Bank of the Republic of Turkey (CBRT) and at its highest level in addition to two years.
Food inflation climbed nearly 30% in August from a year ago and more than 3% from the previous month.
In contrast, the producer price index rose 2.77% month-on-month for an annual increase of 45.52%.
Kavcıoğlu said the gap between consumer and producer inflation was not specific to Turkey alone, noting that it had recently increased significantly above the long-term average in many developed countries. and in development.
The governor has attributed to some extent the recent surge in the prices of some commodities to the pandemic as well as rising commodity prices and disruptions in supply chains. Yet, he said, “we are seeing higher price increases, especially in sectors that have been negatively affected by the pandemic and where demand has been strong.”
“However, we believe that these emerging pricing behaviors will converge again to their pre-pandemic state over the coming period as economic and social normalization accelerates,” he noted.
Turkey this week launched an investigation into the country’s five largest supermarket chains after it was blamed for soaring prices in the country.
Trade Minister Mehmet Muş ordered officials to inspect the prices of a wide range of products, from eggs, milk and vegetables to cleaning products at the five grocery chains, a ministry statement said on Saturday. .
President Recep Tayyip Erdoğan earlier vowed that Turkey would bring the price hike under control as quickly as possible and vowed that the government would prevent “unreasonable” price hikes.
Kavcıoğlu’s remarks came after the central bank unexpectedly cut its key rate by 100 basis points to 18% last week.
The key one-week rate was expected to remain largely stable at 19%, where it had been since March, given rising inflation. It was Turkey’s first monetary easing since May 2020 and the end of a tightening cycle that began 12 months ago.
The day before, Kavcıoğlu told online newspaper T24 that it was difficult for monetary policy to have an effect on food price inflation, and cited the needs of the real sector when asked about the rate cut from last week.
The governor also said that the main reason for the depreciation of the Turkish lira in September was statements by the US Federal Reserve (Fed), adding that there was no reason for the currency to continue to fall rapidly.
The pound fell to an all-time high of 8.8995 per dollar on Friday, a day after the bank announced the rate cut.
Kavcioğlu reiterated that there was no reason for the pound to depreciate rapidly against the dollar, citing a reduction in the current account deficit and an increase in pound deposits.
Also addressing the summit on Tuesday, Deputy Treasury and Finance Minister Akir Ercan Gül said there were two ways to cut interest rates.
“You will limit the budget deficit, minimize the current account deficit. We can reduce the interest by filling these two gaps, ”said Gül.
He also said that loan volumes cannot be increased at random without establishing a healthy lending mechanism.
“We have to be selective. This must be done in particular by properly financing trade, industry and, if necessary, by increasing the cost of consumer credit a little more.