Central Bank disinflation video

The Central Bank of the Republic of Turkey (CBRT) analyzed the issue of disinflation in its video titled ‘Economy for All’.

In the video, “During the disinflation period, the rate of price increase will slow down and a downward trend in inflation will be observed. With the policies implemented, the exchange rate will stabilize, there will be an improvement in the current account balance, a permanent strengthening of capital flows and an increase in reserves. “As expectations improve, price behavior will normalize.”

WHAT IS DISINFLATION?

“What is disinflation? Why do we want disinflation?” The following statements were included in the video answering the questions:

“To understand disinflation it is necessary to first talk about what inflation is.

Inflation is the continuous increase in prices in general. Inflation causes more money to be paid over time to maintain the same standard of living. Disinflation means a decrease in the rate of price increases.

The process of falling inflation during the transition from high inflation to low inflation is called disinflation. During the disinflation process, the inflation rate decreases. With disinflation, the purchasing power of money gradually recovers. The saving function of the national currency comes to the fore. Economic units begin to make more accurate investment and consumption decisions.

Thus, uncertainties in the economy decrease and confidence increases. Improves income distribution. The disinflation process creates an important basis for the transition to a period of stability in which a permanent decrease in inflation will be achieved.

With the strong monetary adjustment that we have implemented since June 2023, we are laying the foundations that will allow the disinflation process to begin and the fall in inflation to be permanent.

‘WILL START IN THE SECOND HALF OF 2024’

With the main trend of inflation falling, the disinflation process will begin in the second half of 2024.

During the period of disinflation, the rate of price increase will slow down and a downward trend in inflation will be observed. With the policies implemented, the exchange rate will stabilize, there will be an improvement in the current account balance, a permanent strengthening of capital flows and an increase in reserves. As expectations improve, price behavior will normalize.

The period of disinflation will be followed by a period of stability. Inflation will continue to fall and reach single digits. Predictability and confidence in the economy will increase and the Turkish lira will maintain its purchasing value. Domestic and international demand for savings and investment of assets in Turkish lira will be strengthened.

Inflation will fall so much that its impact on economic decisions will be negligible. Permanent gains in social well-being will be achieved for all economic segments. “In this way, price stability will be achieved, which is the most important contribution that the Central Bank can make to social well-being.”