2024 inflation forecast revised up slightly, band widened sharply

TURKEY - Report 02 Nov 2023 by Murat Ucer

The CBRT has released the final Inflation Report of the year today, which was, as usual, accompanied by a speech and a presentation by Governor Hafize Gaye Erkan. The CBRT aligned the end-2023 forecast with the MTP, raising it to 65% up from 58% in the July report, and revised the end-2024 forecast relatively modestly to 36% from 33% previously, but widened the uncertainty band around it by a hefty ± 6 pps, to 30%-42%.

The 2023 figure was revised on the back of higher underlying inflation (+2.9 pps), TL-dominated import prices (+2 pps), food inflation (+1.3 pps) and the output gap (+0.8 pps). As for the 2024 forecast, underlying inflation rate (+1.4 pps), import prices (+1.8 pps) and administered prices (+1.5 pps) drove the forecast higher, while food inflation (-1 pps) and the output gap (-0.7 pps) trimmed it somewhat, leading to a, net/net, 3 pps upward revision.

In terms of the path forward, inflation, as expected, is forecasted to peak in May, before decelerating to 36% by end-2024, which, we think, is still too optimistic, even though the Bank seems to be, tactically, hedging for it by adding a wide band around it.

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