End-year inflation expectations rose from 6.77% y/y in February to 6.98% y/y in March, the Central Bank said on March 13, underlining the effects of the recent slide in TRY on inflation forecasts.
Participants of the Central Bank’s monthly expectations survey also revised their 12-month ahead inflation expectations to 6.78% from 6.69% while raising the 24-month inflation forecast to 6.51% from 6.42%. Consumer prices are expected to increase 0.69% m/m in March, higher than the previous month’s estimate of 0.61% for March. The annual rate of inflation quickened from 7.24% in January to 7.55% in February when consumer prices rose 0.71% m/m.
GDP growth expectations for 2015 were cut to 3.3% in March from a previous 3.5% but growth forecast for 2016 was unchanged at 3.8%. The country’s current account deficit is expected to be $39.4 at the end of 2015 whereas the previous estimate was $40.3bn.
Future monetary policy decisions will be conditional on the improvements in the inflation outlook, said the Central Bank in a statement it released after the monetary policy committee meeting on February 24 when it trimmed the main one-week repo rate for a second straight month in a row. The Bank lowered the one-week repo by 25bps to 7.50%, cut its overnight lending rate from 11.25% to 10.75% and overnight borrowing rate from 7.50% to 7.25%. Inflation expectations, pricing behaviour and other factors that affect inflation will be monitored closely, said the Bank in the February 24 statement, reiterating that cautious monetary policy stance will be maintained until there is a significant improvement in the inflation outlook.
|Central Bank Expectations Survey|
|End-Year Inflation (%)||9.16||9.22||9.02||6.82||6.77||6.98|
|12-Month Ahead Inflation (%)||7.54||7.50||7.21||6.81||6.69||6.78|
|End-Year Current Account Deficit ($ bn)||-47.8||-46.7||-44.6||-41.4||-40.3||-39.4|
|End-Year GDP Growth (%)||3.2||3.2||3.0||3.4||3.5||3.3|
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