ANKARA: Turkiye’s central bank raised its end-2023 inflation forecast to 58.0% from 22.3% in its previous report, its new governor, Hafize Gaye Erkan, said on Thursday, vowing to continue the bank’s gradual monetary tightening.
She said the exchange rate of the lira, which has weakened sharply this year, was the main factor in the upward revision, with the end-2024 inflation prediction raised to 33% from 8.8%.
Speaking in Ankara, Erkan said in her first news conference that the bank’s inflation forecast for end-2025 was 15%, with the bank having started the monetary tightening process to reduce inflation permanently.
“Until a significant improvement in the inflation outlook is achieved, we will gradually strengthen monetary tightening as and when necessary,” Erkan said.
A week ago, the central bank raised its policy rate by 250 basis points to 17.5%, continuing to reverse President Tayyip Erdogan’s low-rates policy but with a hike that was smaller than expected by markets.
Turkish central bank says it will tighten until inflation outlook improves
That was the second meeting under Erkan, who is leading a change of course after the one-week repo rate was cut to 8.5% from 19% since 2021 despite soaring inflation.
In her first meeting, the bank raised rates by 650 basis points.
Annual inflation fell to 38.21% in June, having peaked at a 24-year high of 85.5% in October last year.
But economists have revised their year-end forecasts to as high as 60% due to the lira’s continued decline and various tax hikes in July.
The lira traded at 26.9560 as Erkan spoke, unchanged from before the news conference.
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