Turkey central bank raises inflation forecast to 38%

Turkey’s central bank raised its year-end inflation forecast to 38 per cent up from 36 per cent, signalling readiness for further monetary tightening as inflation approaches a peak of 75 per cent, Bloomberg reported on Thursday.

Governor Fatih Karahan emphasised in a speech the commitment to combating inflation, attributing the adjustment to stronger-than-expected domestic demand. Despite the revision, the outlook remains a tight monetary policy stance, with no plans for interest rate cuts after the significant tightening cycle that saw the benchmark rise to 50 per cent from 8.5 per cent last year.

Moreover, Karahan stressed the determination to prevent a permanent deterioration in the inflation outlook and reiterated the intention to uphold tight monetary policy until inflation aligns with the target.

According to Bloomberg, Karahan’s presentation coincides with an anticipated peak in inflation, expected to be followed by disinflation from June due to statistical effects and rate hikes filtering through the economy, despite challenges posed by elevated inflation expectations and robust domestic demand.