Israel-US War on Iran Pushes Inflation Higher, CBRT Governor Warns

(MENAFN) The governor of Türkiye’s central bank noted that ongoing tensions in the Middle East have caused a significant surge in energy costs, generating cost-push pressures on inflation and indirectly influencing prices across multiple sectors.

Looking ahead, the conflict is expected to have additional effects on inflation, with disruptions on both the cost and supply sides already contributing to growing pressures, Fatih Karahan stated in an interview with reports.

Emphasizing the bank’s response to limit the conflict’s impact on price stability, Karahan affirmed: “We are determined to ensure the tightness required for the continuation of the disinflation process.”

Steps to Curb Inflationary Pressures

Question: How does the increase in oil and energy prices stemming from the regional conflict affect inflation in Türkiye, and what do the Central Bank’s short- and medium-term projections indicate?

Governor Fatih Karahan: "The ongoing war has led to a pronounced increase in energy prices, exerting cost-push pressure on inflation. Beyond the direct impact of energy prices, we may also observe indirect inflationary effects across various sectors.

Our analyses indicate that a permanent 10 percent increase in oil prices adds approximately 1.1 percentage points to consumer inflation over a year. The implementation of the sliding-scale system significantly mitigates the spillover of this impact to consumer prices. According to our calculations, the sliding-scale system reduces the impact of oil prices on inflation to one-third.

In the medium term, the war will have both supply- and demand-side effects on inflation. Cost- and supply-side disruptions have already started exerting supply-side pressures. On the other hand, demand-side effects will be shaped by domestic and external policies to be pursued during this process."

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