Turkish central bank foresees annual CPI inflation to come around 7% at the end of this year, central bank governor Erdem Basci said in a press conference on Tuesday when he unveiled the banks monetary and exchange rate policy plans for 2014. End-year inflation target for 2014 is still 5%.

Consumer prices rose 0.01% m/m in November, bringing the annual CPI inflation rate to 7.32% from the previous month’s 7.71%. In October, the Central Bank raised its end-2013 inflation forecast to 6.8% from a previous 6.2% and end-2014 forecast to 5.3% from a previous 5% due to exchange rate developments and oil prices.

The central bank will continue supporting Turkish lira through reserve options mechanism and also through providing USD liquidity to the domestic market next year, Basci informed. The monetary authority will pump about USD 6bn to the domestic market until the end of January via FX selling auctions, it will sell about USD 3bn until the end of this year and will sell a USD 3bn more in January, according to Basci. The authority will sell a minimum USD 450mn each day until the end-2013 and may gradually reduce the FX sales next year.

The central bank will gradually increase reserve option coefficients in 2014 and will provide USD 1bn extra liquidity to the domestic market through changing reserve requirement mechanism but it has no plans to change lira or FX reserve requirements, Basci said.

The central bank will not change its current policy stance and its key interest rates in 2014, but it may take more moderate actions if needed, according to Basci.

The central bank targets to decrease volatility in short-term interest rates and to reduce the consumer loans while increasing the weight of commercial loans in total loan volume, Basci said.