Hafize Gaye Erkan, the Governor of the Central Bank of the Republic of Turkey (CBRT), delivered a presentation before the Planning and Budget Committee of the Grand National Assembly of Turkey on October 3, 2023. The presentation covered an analysis of the global economy, inflation, and monetary policies.(2)A review of the presentation published on the CBRT’s website reveals a comprehensive evaluation of global economic data. This section of the presentation includes an in-depth assessment of data points such as global growth, the Purchasing Manager Index (PMI), and commodity prices.The Central Bank, benefiting from a wealth of knowledge and experience within its team of economists, should approach the analysis of these fundamental indicators in a systematic and rational manner.The section of the presentation concerning inflation in Turkey commences by discussing the trends and components of monthly inflation figures. A key emphasis in this section is the ongoing strength of domestic demand. The presentation further delves into the analysis of the Industrial Production Index and Retail Sales Volume Index, illustrating a stable supply alongside robust demand. It was highlighted that an overly strong domestic demand can eventually disrupt the current account balance. Additionally, the Central Bank noted that the pass-through effect of foreign exchange rate increases on inflation has been steadily growing. As a result, fuel prices have risen, further contributing to the inflation spread. Another issue of direct relevance to our daily lives was addressed in this part of the presentation: tax increases. However, despite acknowledging that tax hikes lead to increased inflation, the Central Bank chooses to use the term “tax adjustments.”Acknowledging the issues is undeniably a crucial element of the presentation. However, the third part of the presentation, the “monetary policy section,” is where the Central Bank truly articulates its core message. Hafize Gaye Erkan stressed the concept of “tightening” both in the presentation and during the Q&amp;A session. The CBRT underlines two significant components of tightening: quantitative tightening and credit tightening. The primary goal of the CBRT is to reduce domestic demand by sterilizing excess liquidity, essentially reducing the monetary base in the market and offering loans in a highly selective manner.Indeed, credit growth plays a crucial role in attaining their objectives, and the presentation indicates that credit growth is already in the process of stabilizing. To achieve quantitative tightening and stabilize the Turkish Lira’s value, the exit from FX-Protected Deposits holds significant importance. The presentation explicitly notes that as of September 22, 2023, FX-Protected Deposits have seen a decrease over the last 4 weeks, with savers shifting towards Turkish Lira time deposits.The reference to the rise in the Central Bank’s reserves and the reduction in Turkey’s credit risk premium (CDS – Credit Default Swap) is another significant highlight in the presentation. However, it’s important to note that the presentation focused on gross reserves, which include foreign currencies obtained through swaps. The crucial aspect of net reserves, excluding swaps, which is closely monitored by the markets, was not mentioned.In conclusion, the general assessment at the end of the presentation indicates that there will be a transition period for disinflation until June 2024, and the disinflation process will conclude in the subsequent year, by June 2025. This period is referred to as the stabilization period. <hr fr-original-style="" style="height: 0px; overflow: visible; border-bottom: none; clear: both; user-select: none; break-after: page; box-sizing: border-box;"> 1 Yüksel Yalçınkaya/Türkiye [BD], no. 15669/20, 26.09.2023, şuradan erişilebilir: https://hudoc.echr.coe.int/eng?i=001-2276362https://www.tcmb.gov.tr/wps/wcm/connect/678cc359-d8bc-45c1-a3bd-a9d3b50d57c1/SunumB03_10_2023.pdf?MOD=AJPERES&amp;CACHEID=ROOTWORKSPACE-678cc359-d8bc-45c1-a3bd-a9d3b50d57c1-oHRIg-S

The Freedom Observer

Another issue of direct relevance to our daily lives was addressed in this part of the presentation: tax increases. However, despite acknowledging that tax hikes lead to increased inflation, the Central Bank chooses to use the term “tax adjustments.”

Inflation Projections in the Central Bank Governor’s Presentation

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