Inflationary pressures have been a major concern on the Turkish economic agenda for the past year. While the consumer price index peaked in October 2018 with 25.24%, the highest in more than a decade, the gradual decreases have been consistent since then. The central bank's recently appointed governor Murat Uysal also confirmed yesterday that the data indicates a moderate amelioration in the economy while improvement in inflation continues.
In a meeting with the Banking Association of Turkey yesterday, Uysal also stressed that the data signifies a moderate amelioration in economic activity in the second quarter of the year with the huge support of net exports.
The central bank governor also stressed that that economic rebalancing continues in the third quarter of the year with relative improvement in the sectoral spread.
According to the statement released by the Central Bank of Republic of Turkey (CBRT), the developments in the domestic market and tight monetary policy continue to support the alleviation of inflationary pressures.
The governor highlighted that the bank maintains its tight monetary policy stance to ensure a convergence with the targeted inflation. "The level of tight monetary policy will be determined to ensure a sustainable decrease in inflation," the statement read.
The central bank significantly cut its benchmark policy rate, the one-week repo rate, by 425 basis points from 24% to 19.75% in the July meeting, the biggest cut since 2002 and the first in 4.5 years.
In reference to the rising economic confidence, soaring exports and sectoral confidence indices, Uysal said, "The recently announced data shows the economy is in a period of moderate amelioration."
The fall in consumer prices in Turkey paused in July, briefly disrupting the downward trend that has prevailed since late 2018 and is expected to strengthen again in the months ahead, paving the way for further interest rate cuts. Earlier surveys projected annual inflation would increase in July from June, which was at the lowest level in a year; however, the hike came in below expectations. The annual inflation last month saw a 16.65% annual hike, data by the Turkish Statistical Institute (TurkStat) showed yesterday, up from 15.72% the previous month.