In last week’s policy meeting, the Turkish central bank suggested that inflation in April is being driven mainly by rising energy and food prices, while the underlying trend is expected to increase slightly.
The summary of the bank’s policy-setting meeting at which it kept interest rates steady was shared on Thursday.
Warning of “uncertainties” amid geopolitical developments and elevated energy prices in March and April, the Central Bank of the Republic of Türkiye (CBRT) said, “Leading indicators suggest that in April, consumer prices will be driven by energy and food prices, whereas the underlying trend will increase slightly.”
“Domestic energy prices posted a substantial rise on account of price increases in natural gas and electricity for households,” it added.
Official inflation data is due to be released next week. The annual inflation rate in March was at 30.87%, compared to 31.53% in February.
“Brent crude oil prices generally trended upward in both March and April,” the bank noted.
On Thursday, the prices reached the highest since the war between the U.S., Israel, and Iran started two months ago, touching briefly $126 before easing.
Among others, the CBRT also pointed out that risks related to the Strait of Hormuz, coupled with the search for alternative routes, “led to longer lead times, and security risks caused higher insurance premiums and freight rates in March. “
Moreover, it said that inflation expectations and pricing behavior continue to pose risks to the disinflation process, as it cited that inflation expectations rose in April.
“Given the size of price volatility and supply constraints in commodities, the uncertainty over the inflation outlook has substantially increased. The effects of these developments and domestic energy prices on the inflation outlook through the cost channel and economic activity are being closely monitored,” it said.
The central bank also said it would tighten its policy stance “if there is a significant and persistent deterioration in the inflation outlook.”
“In case of a significant and persistent deterioration in the inflation outlook, which can also be driven by the recent developments, the monetary policy stance will be tightened. The committee reiterated that it remains highly attentive to upside risks on inflation.”
