Inflation in Türkiye expected falling to around 24 pct next year: IMF

Inflation in Türkiye is expected to fall to around 24 percent next year, according to a report released by the International Monetary Fund (IMF) on Wednesday.

"In the medium term, a further drop in inflation would boost confidence, and growth would rise back toward potential of 3.5-4 percent," the IMF said in its 2024 Article IV Mission.

The financial agency said headline inflation in Türkiye has started easing this summer, but still it remains high, adding "Despite favorable base effects, still-strong inertia would keep inflation at around 43 percent at end-December."

The IMF said a tighter policy mix that is focused on fiscal policy would reduce risks and bring inflation down more quickly and sustainably.

It added that a larger and more front-loaded fiscal consolidation is needed to help reduce inflation.

The agency said tight financial conditions will be needed until inflation is firmly on a downward path and inflation expectations converge to the central bank's forecast range.

Türkiye's annual inflation rate was at 61.78 percent in July, slowing from 71.60 percent in June, and down from 75.45 percent in May.

The IMF said the Central Bank of the Republic of Tükiye "should continue smoothing temporary exchange rate volatility while avoiding undue real appreciation, and replenish reserves buffers opportunistically" until sequential inflation is on a sustainable downward trend.

"As inflation falls and reserve buffers improve, intervention can be scaled back, and allow the exchange rate to act as a shock absorber," it added.

It advised that intervening against persistent shocks should be avoided.

The financial agency said tight monetary and income policies are expected to weigh on domestic demand...