World Economy

Turkey Sharply Increases Inflation Forecast

Turkey Sharply Increases Inflation ForecastTurkey Sharply Increases Inflation Forecast

Turkey’s central bank sharply raised its 2018 inflation forecast to 13.4% from 8.4% previously, governor Murat Cetinkaya said Tuesday.

Speaking at the bank’s quarterly inflation briefing, Cetinkaya also said the bank was lifting its 2019 year-end inflation forecast to 9.3% from the 6.5% announced in the previous report in April, Anadolu Agency reported.

The revisions follow a leap in consumer price inflation to a 14-year high of 15.39% in June, which has helped drive the lira beyond 4.9 to the dollar in recent weeks, despite interest rate hikes of 500 basis points since April. The lira, which has lost around a fifth of its value this year, stood at 4.915 per dollar at noon.

Data from the second quarter suggested economic activity was decelerating and had started rebalancing, Cetinkaya said.

However, inflation will show a limited increase in the third quarter, he said, adding that a tight monetary policy stance would be maintained for a long time.

The Turkish lira began the week on July 30 testing rates weaker than 4.90 against the US dollar after Fitch Ratings warned in a report that negative outlooks on banks in Turkey reflected the continued prevalence of multiple risks. The credit profiles of the country’s banks, subject to widespread rating downgrades in July, remained exposed, according to the ratings agency.

The lira was trading at 4.904, a retreat of 1.29% d/d against the dollar as of 14:00 local time. By 16:45, it stood at 4.875. The benchmark BIST-100 Istanbul stock market index was down 0.15% to 95,440 in early afternoon trading while the banking stocks index was down 0.45% d/d.


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