“Stability of Turkish Lira and Price Audits Will Trigger Lower Inflation”
The stability of the Turkish lira and the price inspections by the government will ensure a gradual decline in inflation, the country’s Treasury and Finance Minister said on Wednesday, also stressing that the current currency fluctuations were not of concern. .
Inflation will cease to be the chronic problem of the economy and will drop to single digits in 2023, Nureddin Nebati said in an interview with private broadcaster CNN Türk.
The annual consumer price index (CPI) hit over 21% in November, its highest level since November 2018. Inflation is expected to have exceeded 30% in December, topping the level for the first time since 2003 , according to surveys.
Nebati said they expect high inflation for December when the Turkish Statistical Institute (TurkStat) announces the data on January 3. But he noted that the uptrend would reverse from January, especially given the improvement in exchange rates and the so-called base effect.
The rise was due to a depreciation of the pound, which made imports more expensive and followed a series of interest rate cuts. The Central Bank of the Republic of Turkey (CBRT) has lowered its policy rates by 500 basis points to 14% since September.
The recent decline in the pound was reversed last week after President Recep Tayyip Erdoğan announced a plan to protect the pound’s deposits against currency volatility, triggering a historic 50% increase in the value of the currency .
Prices to return to normal
“This increase (in inflation) will soon turn into a negative trend. Our strict fight against inflation will begin, ”said Nebati.
Prices will return to normal levels on a monthly basis, positively affecting inflation, he added.
“The drop in the exchange rate will also have an impact. The year 2022 will be stable. We will gradually see reductions in inflation from January, we will see reductions on a monthly basis, ”he said.
Businesses and sellers began to lower prices for a range of products after being urged to do so following a rebound in the pound. Price cuts could reach up to 40% within a month, Turkish Retailers Federation (TPF) vice president Ali Kaya said on Wednesday.
“We will no longer have a phenomenon like inflation as we approach 2023 because we have entered a positive vicious cycle,” Nebati said. “Next year there will be a readjustment, a recovery. In January 2023, we will all have seen that these things have come to a very good point, ”he added.
The country’s central bank said temporary factors were pushing prices up and predicted inflation would follow a volatile pattern in the near term.
Its monetary policy next year will be formulated with the aim of gradually reducing inflation towards its medium-term target of 5%, according to its annual report on the monetary and exchange rate framework for 2022, released on Wednesday.
He said monetary policy would be designed to gradually achieve the goal.
Read balance “without worry”
Nebati also said that the pound’s current swings were not of concern and that it would return to normal levels.
The currency was down about 3.1% on Thursday and traded at 13.038 against the US dollar around noon from a close of 12.61 on Wednesday. It hit an all-time low of 18.4 to the dollar before registering a massive rebound after Erdoğan’s announcement.
Nebati said the swings “go up and down” and will eventually balance out. “You can see and follow the swings, you can read the behavior of the players,” he noted. “Everything is under control.”
The minister also reiterated that there had been no direct intervention or backdoor on the night of December 20 when the new Turkish lira defense program was announced and the pound registered a historic increase.
He also urged citizens to prosecute those who make “speculative” comments on social media about reading it.
Nebati’s comments follow the banking regulator’s decision to file a complaint earlier this week against more than 20 people, including Durmuş Yılmaz, a former central bank governor and now member of the opposition Good Party (IP) parliament, for their posts on Twitter. Yılmaz headed the monetary authority between 2006 and 2011.
Nebati accused commentators of using “psychological warfare” by urging Turks to buy gold and dollars in order to preserve their savings against further lira drops.
“File a complaint against anyone who misleads you,” he told citizens. “Let the small investor who makes a loss sue the one who misled them.”