Türkiye's Central Bank Raises Inflation Forecasts, Vows Tight Policy

FILED - 24 May 2018, Türkiye, Istanbul: Turkish lira are kept fanned out. Photo: Can Merey/dpa
FILED - 24 May 2018, Türkiye, Istanbul: Turkish lira are kept fanned out. Photo: Can Merey/dpa
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Türkiye's Central Bank Raises Inflation Forecasts, Vows Tight Policy

FILED - 24 May 2018, Türkiye, Istanbul: Turkish lira are kept fanned out. Photo: Can Merey/dpa
FILED - 24 May 2018, Türkiye, Istanbul: Turkish lira are kept fanned out. Photo: Can Merey/dpa

Türkiye's central bank raised its year-end inflation forecasts for this year and next to 44% and 21% respectively on Friday, and Governor Fatih Karahan vowed to keep policy tight to propel the disinflation process and hit targets.

The bank's previous inflation report three months ago forecast year-end inflation of 38% in 2024 and 14% next year, Reuters reported. The revision underlines its tougher-than-expected battle against inflation that began with aggressive rate hikes 18 months ago.
Presenting a quarterly update in Ankara, Karahan cited improvement in core inflation trends even as service-related price readings are proceeding slower than anticipated. But even in that sector, inflation is gradually losing momentum, he said.
"We will decisively maintain our tight monetary policy stance until price stability is achieved," he said. "As the stickiness in services inflation weakens, the underlying trend of inflation will decline further in 2025."
October inflation remained loftier than expected, dipping only to 48.58% annually on the back of tight policy and so-called base effects, down from a peak above 75% in May.
Monthly inflation - a gauge closely monitored by the bank for signs of when to begin rate cuts - rose by 2.88% in the same period on the back of clothing and food prices.
The bank has hiked rates by 4,150 basis points between June 2023 and March 2024, to 50%, as part of an abrupt shift to orthodox policy after years of low rates aimed at stoking growth.

President Recep Tayyip Erdogan, who in past years was viewed as influencing monetary policy, had supported the previous unorthodoxy. It triggered a series of currency crashes and sent inflation soaring.

Erdogan was quoted on Friday as telling reporters that "no one should doubt" the steady decline in inflation and that economic steps would continue with discipline and determination to ease price pressures.

The central bank warned last month that a bump in recent inflation readings increased uncertainty, prompting analysts to delay expectations for the first rate cut to December or January.

Karahan said the new inflation forecasts were based on maintaining tight policy, adding the bank would do "whatever is necessary" to wrestle inflation down, and pointing to what he called a significant fall in the annual rate since May.

He said the slowdown in domestic demand continues at a moderate pace and the output gap has continued to decline in the third quarter.



Saudi PIF Invests $200 Million in ETF Bond Fund

The fund is the first of its kind in Saudi Arabia to focus on fixed-income exchange-traded funds (ETFs). (Asharq Al-Awsat)
The fund is the first of its kind in Saudi Arabia to focus on fixed-income exchange-traded funds (ETFs). (Asharq Al-Awsat)
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Saudi PIF Invests $200 Million in ETF Bond Fund

The fund is the first of its kind in Saudi Arabia to focus on fixed-income exchange-traded funds (ETFs). (Asharq Al-Awsat)
The fund is the first of its kind in Saudi Arabia to focus on fixed-income exchange-traded funds (ETFs). (Asharq Al-Awsat)

State Street Global Advisors, a subsidiary of State Street Corporation, announced that Saudi Arabia’s Public Investment Fund (PIF) has invested SAR 750 million ($200 million) in the newly launched SPDR J.P. Morgan Saudi Aggregate Bond ETF.

According to a statement released by the company on Wednesday, this fund is the first of its kind in Saudi Arabia to focus on fixed-income exchange-traded funds (ETFs). It is listed in both the London Stock Exchange and Germany’s Xetra, offering investors the opportunity to track government and quasi-government bonds denominated in either the Saudi Riyal or the US Dollar, including sukuk (Islamic bonds).

This investment aligns with the objectives of Saudi Vision 2030, representing a significant step toward enhancing the international presence of Saudi Arabia’s financial markets and attracting foreign investments. The fund is available to investors across several European countries, including Austria, Denmark, France, Germany, and Italy.

Commenting on the investment, Yazid Al-Humaid, Deputy Governor and Head of MENA Investments at PIF, said: “The fund continues to create opportunities and enable access to diverse capital markets in the Kingdom. Investing in the first internationally listed Saudi fixed-income ETF underscores PIF’s commitment to deepening Saudi capital markets, attracting investors, and fostering partnerships across global financial centers.”

CEO of State Street Global Advisors Yi-Hsin Hung emphasized that the launch of the fund is a significant milestone in providing innovative opportunities for investors while contributing to Saudi Arabia’s economic growth.