Türkiye’s central bank raised its projection for year-end inflation by nearly five percentage points, citing the higher costs of energy and other imports.
Governor Sahap Kavcioglu said Turkish consumer inflation would be around 65.2% at the end of 2022, up from the central bank’s July forecast of 60.4%.
The bank also raised its end-2023 mid-point inflation forecast to 22.3% from 19.2%.
Kavcioglu said a normalization in global energy costs should help slow price gains next year even as he is cutting interest rates to single digits in line with demands by President Recep Tayyip Erdogan.
Consumer inflation accelerated to 83.45% in September, the highest level in more than two decades and more than 16 times Türkiye’s official target of 5%.
Erdogan, who is preparing for a difficult presidential race and a battle for his Justice and Development party in the upcoming presidential and parliamentary elections, pledged to reduce inflation by early 2023.
Minister of Treasury and Finance Nureddin Nebati also affirmed that inflation will begin to decline by the end of 2022.
In response to Erdogan’s decision to cut interest rates to single digits, the bank cut its interest rate by 200 basis points in August and September and 150 points in October, down from 14% in July to 10.5%.
The governor’s presentation indicated that inflation was seen peaking at around 85% in late autumn before falling.
“Inflation will decrease rapidly on the back of continued supply, the maintenance of stability in exchange rates and the normalization of pricing behavior,” Kavcioglu told reporters at a news conference in Ankara.
Asked whether the bank had succeeded in lowering inflation, Kavcioglu said that “we cannot consider ourselves very successful. God willing, the decisions we have taken will make us successful in a short time.”
Erdogan has prioritized exports, production and investment as part of an economic program that aims to lower inflation by flipping Türkiye’s chronic current account deficits to a surplus.