The Central Bank of Turkey has raised its 2014 inflation forecast to 7.6% from a previous 6.6%, well above its target of 5% but it did not change its forecast for 2015. Of this revision, 0.3 percentage points stemmed from the higher-than-anticipated depreciation of TRY, and 0.1 percentage points from the slight increase in import and oil price assumptions while the upward revision to assumptions for food price increase drove the end-year forecast up by 0.3 percentage points, the Bank explained.
Inflation is expected to be, with 70% probability, between 6.4% and 8.8% (with a mid-point of 7.6%) at end-2014 and between 3.2% and 6.8% (with a mid-point of 5%) at end-2015, the Bank said in its latest Inflation Report, released on Wednesday. The Bank expects inflation to stabilize around 5% in the medium term. Annual inflation will remain elevated for a while due to high food prices and the lagged effects of the TRY depreciation and to be considerably above the 5% target at the end of the year, the Bank said.
The Central Bank may deliver moderate, gradual cuts in interest rates, the Bank’s governor Erdem Basci said on Wednesday but he did not comment on the timing. The Bank will keep monetary policy tight until there is an improvement in the inflation outlook, Basci added.
| CBRT's 2014 Forecasts in Inflation Report | ||
| Jan 2014 | Apr 2014 | |
| Headline Inflation (end-year, %) | 6,6 | 7,6 |
| Inflation Target (end-year, %) | 5 | 5 |
| Food Inflation (%) | 8 | 9 |
| Source: CBRT | ||
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