Turkey’s Central Bank announced its second inflation report for 2016 on Tuesday, in which the year-end inflation prediction was kept unchanged at 7.5%. The year-end inflation forecast for 2017 was also kept at 6%.
Newly-appointed Governor Murat Cetinkaya stated that the fiscal policy will be determined in accordance with inflation outlook, and the CBRT will continue pursuing tight fiscal policy, Anadolu Agency reported.
Cetinkaya, who replaced former governor Erdem Basci on April 19, said that the recent developments in global markets have affected Turkish economy positively, underlining that volatility in loans and currency rates have decreased.
He added that if global volatility continues, the bank will implement a narrower interest corridor.
Cetinkaya said it aims to simplify its monetary policy as much as economic conditions will allow in the upcoming period. But, he warned, the simplification steps are not a one-directional move since it is closely linked to global economic conditions and local macro indicators.
On April 20, just after Cetinkaya took the helm, the bank’s monetary policy committee introduced a 50 basis-point rate cut to overnight lending rate, or the upper limit of interest rate corridor policy, which is deemed confusing by some financial experts and markets.
The bank in the same meeting also left the one-week repo rate at 7.5% and the overnight borrowing rate at 7.25% unchanged.
Despite the cut, Cetinkaya pointed out at the press conference, further cuts would be dependent on the inflation outlook.
“Monetary policy in the forthcoming period will be closely linked to inflation outlook. Taking inflation expectation, pricing behavior and other developments into account, we will maintain a tight monetary policy as long as required,” he said.
Cetinkaya said that moderation of uncertainties in Turkey from a year back is likely to boost local consumption through improvements in consumer and investor confidence.
On April 11, Cetinkaya was appointed as the new governor of CBRT to replace Erdem Basci, who often had differences of opinion with government officials over monetary policy as the Turkish government favored lower rates to boost investment.
