Turkish central bank lowers 2019 inflation forecast to 13.9pc

Madiha Shakeel July 31, 2019

ANKARA: Turkey’s central bank lowered it 2019 inflation forecast on Wednesday and governor Murat Uysal said the bank has “considerable” room for manoeuvre on rates in coming months.

Uysal, appointed earlier this month by President Tayyip Erdogan to replace former governor Murat Cetinkaya, also said the bank had independence in its use of tools to reach its inflation target.

Asked about the central bank’s steps for the rest of the year, after it cut its benchmark rate by 425 basis points last week to 19.75%, Uysal said the bank had considerable room to act in the period ahead.

“However, the usage, timing and the size of this, as I said, will depend on both the developments in price stability and it will depend on developments on the point of financial stability. We will make (the decision) based on data,” he said.

He said the bank cut its inflation forecast for 2019 to 13.9% from 14.6%.

Inflation hit a 15-year high of more than 25% in October in the wake of a lira crisis that saw the lira close the year nearly 30% down against the dollar. It declined to just below 16% in June.

The central bank had hiked its policy rate to 24% at the peak of the crisis last year. High rates, along with companies burdened with large amounts of foreign currency debt, drove the economy into recession. It contracted annually in the last quarter of 2018 and the first quarter of this year.

Uysal also said the central bank had a more optimistic outlook for Turkey’s economy in 2020 as the country leaves behind the impact of a volatile lira. It left its inflation outlook for next year unchanged at 8.2%.

Copyright Reuters, 2019

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