Central Bank sharply raises 2018 year-end inflation forecast

ISTANBUL

The Central Bank of Turkey (TCMB) has sharply raised its 2018 inflation forecast to 23.5 percent from its previous forecast of 13.4 percent, Central Bank Governor Murat Çetinkaya said on Oct. 31.

Speaking at the bank’s quarterly inflation briefing, he also said the bank was lifting its 2019 year-end inflation forecast to 15.2 percent from the 9.3 percent announced in the previous report in July.

Çetinkaya said a deterioration in the inflation outlook was continuing in the second half.

Turkish economic activity slowed down in the second quarter and that slowdown continued in the third quarter, he added.

“Although weaker domestic demand conditions will partially mitigate the deterioration in the inflation outlook, upside risks to the pricing behavior continue to prevail,” Çetinkaya said.

“The tight stance in monetary policy will be maintained decisively until the inflation outlook displays a significant improvement,” he added.

The Bank expected the inflation rate would stabilize in the medium term at five percent.

Turkish inflation surged to nearly 25 percent in September from a year earlier, official data showed on Oct. 3, hitting its highest in 15 years.

In one month, the cost of food and non-alcoholic drinks rose more than 6 percent and transportation surged more than 9 percent, the data then showed.

The Central Bank also sharply raised its food price inflation forecast to 29.5 percent in 2018 from 13 percent previously, revising its 2019 forecast to 15 percent from 10 percent.

Çetinkaya also said the bank was revising its oil price assumption to $75 from $73 for 2018 and to $80 from $73 for 2019.