Central Bank keeps inflation forecast unchanged

ANKARA

The Central Bank has not changed its 2023 inflation forecast and maintained its year-end consumer price index at 22.3 percent.

“In the upcoming period, we will see that the pricing behavior will become compatible with the economic fundamentals with the decrease in inflation,” Central Bank Governor Şahap Kavcıoğlu said on Jan. 26 at a press conference to reveal the bank’s first inflation report of the year.

The bank increased its average crude oil price forecast for this year to $80.8 from the previous $79.3, while keeping its food prices increase stable at 22 percent in 2023 and 11.5 percent in 2024.

“In 2022, global inflation was pushed up by the upsurge in energy costs. However, the recent decline in energy and commodity prices, the improvement in lead times due to the change in China’s pandemic policies, and the subsidies on energy prices had a favorable effect on consumer price inflation,” Kavcıoğlu told reporters.

“As the factors causing an uptick in inflation have eased, inflation expectations for 2023 are being revised downwards in many countries, including Türkiye.”

Despite global supply shocks and the war in Ukraine, the Turkish economy continued to grow at a sustainable pace, noted the governor.

“Our economy’s production capacity increased on the back of exports, while investments continued uninterruptedly despite adverse global conditions,” he said. “Accordingly, net exports have contributed to annual growth for the last seven quarters in a row.”

Türkiye will not see high price increases in 2023, Kavcıoğlu said.

“There is no ground for the persistence of high price increases in an environment in which external shocks have lost their impact, cost shocks have been entirely reflected, predictability has increased at a time when exchange rate volatility is heightened all over the world, and our companies are also supported in terms of financing costs,” he said.

“In the upcoming period, we will see that pricing behavior will become more compatible with the economic fundamentals in line with the fall in inflation. In 2023, we will implement all our policies decisively to ensure that inflation is aligned with the forecasts,” he added.

To reduce inflation and achieve price stability on a permanent basis, the bank implements policies to support production and investments, Kavcıoğlu noted.

“By designing our monetary policy practices with a focus on liraization, we also fight against structural factors that disrupt price stability and expose the economy to external shocks,” he said.

“We left behind 2022, the year in which we built our liraization strategy and started to yield the positive results of our monetary policy actions. In 2023, in which we will proudly celebrate the centenary of our Republic, we will continue to use all available tools in the most effective way to achieve and maintain our primary objective of price stability.”