Turkish central bank maintains year-end inflation forecast at 22.3%
The Central Bank of the Republic of Türkiye (CBRT) Thursday kept the country’s year-end inflation forecasts for both 2023 and 2024.
Consumer prices are projected to rise 22.3% this year and 8.8% next year, the bank’s governor told a news conference marking the release of the bank’s first quarterly inflation report in 2023.
Noting that the bank sees the inflation forecasts as an intermediate target, Şahap Kavcıoğlu referred to the bank’s emphasis on Turkish liras over foreign currency, saying: “We will continue to use all the tools of our “liraization” strategy to support an inflation path consistent with our forecasts.”
The bank also said it expected the slowing trend in global economic activity to continue this year, and that the recent moderate course of commodity prices, led by energy, will remain in place in the upcoming period.
The bank also maintained its food inflation estimate of 22% for 2023, and 11.5% for 2024, in line with the previous forecast.
Seeking to stabilize the national currency, the monetary authority last year unveiled the liraization strategy, which it says is its integrated policy framework. It repeated it had no exchange rate target level and would not buy or sell hard currencies to direct the lira.
The Turkish lira deposit ratio rose from 35.6% in January to 55.1% at the end of 2022.
The figure is aimed to hit 60% in the first half of this year, as laid out by the country’s monetary policy and liraization strategy for 2023.
Kavcıoğlu also noted that the bank anticipates that improvements in pricing behavior and inflation expectations will continue in the upcoming period, thanks to decisions made within the framework of the bank’s policies.
Annual inflation in Türkiye showed a sharp fall in December and came in below expectations, mainly because of a favorable so-called base effect and after hitting a 24-year high in October.
Consumer price inflation eased to 64.27% in December from the 84.39% reported in November, the Turkish Statistical Institute (TurkStat) said. The latest reading marks the lowest since March when prices rose 61.14%.
The coronavirus pandemic and the Russian invasion of Ukraine have stoked inflation around the world, spearheaded by soaring food, energy and commodity prices.
December marked the second month in a row that Türkiye’s inflation has eased after hitting a 24-year high of 85.5% in October.
The bank, following a Monetary Policy Committee (MPC) meeting on Thursday, said in a statement that consumer prices increased by 1.18% in December and annual inflation fell by 20.12 points to 64.2%. It stated that moderate price movements reduced annual inflation in all sub-groups, and core goods and food groups played a more important role in this decline.
It was noted that annual inflation in core goods decreased in all subgroups, while the decline in the durable goods subgroup was more pronounced. According to the results of the Market Participants Survey for January, the decline in inflation expectations continued.
The CBRT, during the first meeting of the year, kept its one-week repo rate, also known as the policy rate, unchanged at 9%.
“The level and underlying trend of inflation have been improved with the support of the integrated policy approach implemented to strengthen sustainable price stability and financial stability,” the bank said in a statement following its first MPC meeting of 2023.
Türkiye’s new economic program has prioritized rate cuts to boost production, employment and investment with the aim of turning the country’s current account deficits into a surplus.
