Turkey ups inflation forecasts on high food, energy prices

Reuters/Central Bank of Turkey handout

Turkey’s central bank has increased the inflation forecast for 2023 to 65 percent from its previous estimate of 58 percent and persisted in gradually tightening its monetary policies.

Inflation has accelerated due to high food and energy import prices, said governor Hafize Gaye Erkan, adding that the forecast for 2024 was raised to 36 percent from 33 percent.

“Getting high and volatile inflation under control will be a long and difficult process. We will continue to use all tools available in a determined way to ensure disinflation,” Daily Sabah newspaper quoted Erkan as saying.

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Inflation hit a 24-year high at 85 percent in 2022 and continued to advance in recent months as the Turkish lira weakened amid an aggressive tightening policy.

Following Erkan’s appointment as governor in June, the bank has raised interest rates by 2,650 basis points as part of a broader policy shift.

The governor said the bank expected disinflation to start after it peaked at around 70-75 percent in May and monetary tightening will continue until there was a “visible improvement in inflation”.

“Our policy is effectively influencing financial conditions, including interest rates, loans, deposits and foreign exchange markets, as well as domestic and external financing and reserves,” she added.

The central bank increased its policy rate by 500 basis points to 35 percent last week, a consecutive three-month drive to control inflation, which soared to 61.5 percent in September.