fatih karahan : recent economic and financial developments in turkey speech by ms fatih karahan, governor of the central bank of the republic of turkey, at the briefing on the inflation report 2024 - ii, ankara, 9 may 2024. * * * distinguished members of the press, esteemed participants, welcome to the briefing to convey the main messages from the second inflation report for 2024. i would like to extend my respect and greetings to all of you. as we have always underlined, the cbrt's primary objective is to achieve and maintain price stability. to this end, we have been implementing strong monetary tightening since june 2023. we closely monitor price setting behavior and inflation expectations. we are determined to maintain our tight monetary policy stance until inflation falls to levels consistent with our target. i would like to emphasize again at the beginning of my speech that we will definitely not allow a permanent deterioration in the inflation outlook. i will start the meeting with a presentation on our assessment of the global and domestic macroeconomic outlook and our monetary policy stance, as well as our inflation forecasts. later on, i will address your questions. before i begin my assessments, i would like to draw your attention to the box studies we have included in our inflation report regarding the prominent issues on the agenda. the boxes in the report cover different topics such as services inflation, expectations and tl deposits. i would like to make a special note here for those who are interested. distinguished guests, i will first touch upon recent key developments in the global economy. global financial conditions continue to weigh on growth. geopolitical developments and the ongoing tight monetary policies stand out as risk factors for the course of global economic activity. meanwhile, both the export - weighted global growth outlook and leading indicators point to a limited improvement in global economic activity, compared to the previous reporting period, mostly driven by the services sector. the recent growth outlook for the us economy has diverged favorably from that of the euro area and other advanced economies, and economic activity in the us has been relatively robust. 1 / 12 bis - central bankers'speeches commodity prices continue to be driven by the outlook and composition of global growth, geopolitical risks, financial conditions, and supply - side factors. commodity prices have posted broad - based increases since the previous reporting period. in addition to supply - side factors, some industrial commodities have recorded notable price increases, particularly in line with china's growth. with the heightened geopol

##itical tensions, precious metal and oil prices also soared significantly, compared to the previous reporting period. while global disinflation remained on track, inflation was above the targets in many economies. the stickiness of services inflation and geopolitical developments are impeding the disinflation process. while headline inflation receded to near - target levels in some emerging economies, it remained significantly above the targets in others. meanwhile, in advanced economies, the decline in headline inflation was replaced by a flatter course, and core inflation continued to fall. against this backdrop, expectations have strengthened that the central banks of advanced economies will cut interest rates later and at a slower pace compared to the previous reporting period. as seen on the graph, the flattening of the market - implied policy rate path was more pronounced for the fed. this divergence increases global uncertainty and puts pressure on the currencies of emerging economies. accordingly, we consider that the central banks of emerging economies will be more prudent in cutting interest rates. these developments led to a decline in the global risk appetite as well as portfolio outflows from emerging economies in the recent period. macroeconomic outlook distinguished guests, now i would like to share with you our observations on macroeconomic developments in turkiye. 2 / 12 bis - central bankers'speeches data for the last quarter of 2023 indicate that the annual contribution of domestic demand to economic activity declined. meanwhile, the negative contribution of net exports decreased in this period. in the first quarter of 2024, domestic demand is still resilient. retail sales and trade sales volume indices, and card spending pointed to an acceleration in consumption in the first quarter. on the other hand, despite some uncertainty due to the religious holiday, leading indicators for the second quarter suggest a milder outlook for domestic demand compared to the first quarter. while card spending weakened in real terms in april, manufacturing firms'expectations for future domestic orders continued to decline on a quarterly basis. similarly, interviews with firms in april confirmed this outlook. on the other hand, imports of consumption goods diverged from this trend by recording an increase in april. in this respect, we closely monitor the impact of monetary tightening on domestic demand using a variety of indicators. compared to the outlook i summarized for domestic demand, domestic production has been on a milder course. as of february, industrial production increased on a quarterly basis, but this increase seems to be more limited when highly volatile sectors are excluded. the services production