Expectations for Turkey's end-2018 inflation rate rose to 12.28% in June from 11.07% in May, the central bank’s regular survey of businesses and analysts showed on June 11.

End-2018 inflation expectations fell to as low as 9.49% in March after which sharp increases were posted in the following three months, mainly due to the nosediving Turkish lira amid the overheating Turkish economy - latest GDP data released on June 11 shows it continued to grow at "warp-speed" in the first quarter, but there are fears it is in for a hard landing.

The central bank’s inflation target for 2018 is 5%. The regulator has lifted its CPI inflation forecast for 2018 to 8.4% in its latest inflation report from the previous estimate of 7.9% given in the January inflation report, central bank governor Murat Cetinkaya said on April 30.

Turkey’s annual consumer price inflation jumped from 10.85% in April to 12.15% in May, taking the rate up to the highest level recorded since last November’s 12.98%, the Turkish Statistical Institute (TUIK) announced on June 4.

Turkey’s inflation jumped into the double digits in February 2017. Since then the rate has only once moved back into the single digits, with that occurrence recorded in July last year due to the base effect of an economic soft spot caused by the July 2016 failed coup. After last November’s 12.98%, there was a slow descent to the March figure of 10.23% before the re-escalation of inflation in the past two months.

Turkey’s central bank on June 7 substantially surprised markets by announcing a 125-basis point (bp) hike in its main policy rate to 17.75%, a tightening that was in excess of expectations.

It is too early to say whether Turkey’s central bank is getting serious about tackling the country’s high inflation, Capital Economics said on June 7.

Survey respondents also said that they expected the USD-TRY rate to be 4.5837 at the end of this year, a significant weakening from the 4.4352 anticipated in the May survey.

Respondents in the central bank survey forecast that GDP growth will be 4.2% this year, lower than the 4.6% foreseen in May.

On April 17, the International Monetary Fund (IMF) announced in its latest edition of the World Economic Outlook that it had revised its 2018 GDP growth forecast for Turkey upwards by 0.9pp to 4.4%.

A tight monetary stance would be required to keep inflation expectations anchored, the IMF said, projecting inflation in Turkey would come in at 11.4% in 2018.

Looking at expectations for Turkey’s current account balance as a percentage of GDP, the IMF assessed that it was -5.5% last year and would be -5.4% in 2018.

According to the central bank survey, Turkey’s end-2018 current account deficit expectations remained constant at $53.5bn from April to May.