Inflation in Türkiye has been declining uninterruptedly for 14 months and is expected to fall further below 30% by the end of the year, Vice President Cevdet Yılmaz said on Wednesday.
Speaking in a live interview, Yılmaz said the authorities were moving in the "right direction," which he said was important, reiterating that they would continue to implement the medium-term program.
Responding to a question about the goals and outcomes of the 2024 Medium-Term Program (MTP), he recalled that they divided the fight against inflation into three phases.
"One was the transition period, the second phase was disinflation, and the third phase was permanent price stability. The first phase was completed in June of last year, and the disinflation process began. Since then, the inflation rate has been falling uninterruptedly for 14 months," the vice president said.
"It fell from 75.5% to 33.5%, meaning there was a 42-point decrease in inflation. Looking at the end of the year, we can now easily see inflation below 30%," he added.
As the government readies to present a new medium-term program in September, Yılmaz stressed that when preparing the program, they cannot foresee what he described as "external effects on the program," citing issues such as global developments, moves by trade partners, or the frost event which Türkiye witnessed earlier this year.
In its last forecast for the MTP shared last fall, the government set a 17.5% target for this year. However, since then, global markets have been roiled by tariffs imposed by U.S. President Donald Trump, which Yılmaz also said carried "the biggest impact."
He recalled that when the levies were announced on April 2, the risk premiums in all emerging economies jumped and uncertainty arose, which he said impacted economic activity and trade.
Furthermore, Yılmaz emphasized the importance of having the "right program," adding that regardless of these factors, the goals can be reached earlier or later with the right program.
"Thus, we have implemented this program with determination and will continue to do so," he said.
"As I said, at the end of this year, we are now seeing figures in the 20s. Next year, we will be talking about figures in the 10s, which means (putting) inflation largely off the agenda," he affirmed.
"We will continue our fight until we reach single digits," he added.
The Turkish central bank, earlier this month, changed its communication strategy regarding inflation by separating its official inflation target from its forecasts. It kept its target for this year at 24%, even though it is forecasting inflation of between 25% and 29%.
On the question of interest rates, Yılmaz said he expects further monetary easing given the country's downward inflation trend, after the central bank had restarted a rate-cutting cycle last month.
"Of course, we expect one," he said when asked whether another cut is expected. "As you know, the inflation trend is clear," he added.
"This is also reflected in expectations," he furthered.
Related to the question on expectations for inflation among households, Yılmaz said that these are generally higher than those of market participants in the world also, not only in Türkiye, as they look at the past experiences.
Data shared by the country's central bank showed earlier this week that households' expectations for inflation in 12 months from now fell by 0.4 percentage points to 54.1%, marking the lowest level since November 2021.
The central bank is widely expected to continue easing next month after it slashed its policy rate by 300 basis points to 43% in July, resuming a cycle that had been disrupted by political turmoil earlier this year.
Moreover, related to the situation in the industry, Yılmaz explained that they see it as a very important area, are aware of the challenges, and are doing everything they can to stand by the industry.
"Inflation is trending downward, and interest rates have also entered a downward cycle. We can easily say that financial conditions will improve significantly in the coming period," he said.
