Central Bank to ‘maintain inflation aim’ in 2018
ANKARA – Anadolu Agency
The Central Bank will maintain its price stability-oriented monetary policy framework and inflation targeting will continue to shape the monetary policy regime in 2018, according to the bank’s Monetary and Exchange Rate Policy for the 2018 report issued on Dec. 5.
“Monetary policy decisions will be based on inflation expectations, pricing behavior and other factors that affect inflation,” the bank said.
“Financial stability will also be considered while inflation is aimed to be kept close to the target,” it said.
The bank added that it will continue to cooperate with other institutions to remove structural impediments to lowering inflation.
Saying that its main objective is achieving and maintaining price stability, “to this end, the inflation target for the 2018-2020 period is set at 5 percent as per the agreement reached with the government,” it said.
“In line with the Medium-Term Program, it is anticipated that inflation will gradually converge to the 5 percent target in 2018-2020,” the bank said.
“Being an element of accountability of the Central Bank, the uncertainty band is being kept at 2 percentage points in both directions, as in previous years,” the bank also said, adding that an open letter to the government will be submitted if outcomes exceed these boundaries at the end of 2018.
According to the Turkish Statistical Institute, consumer prices in Turkey rose 12.98 percent in November on a yearly basis—the highest annual inflation this year—up from 9.22 percent at the beginning of 2017.
Previously, the Central Bank forecasted that the inflation rate would fluctuate between 9.3 percent and 10.3 percent through the end of 2017.
Since 2005, the lowest annual inflation was seen in March 2011 with 3.99 percent, while the highest was seen last month.
The bank stated that it will continue to implement a floating exchange rate regime next year, and that the exchange rate will not be used as a policy instrument.
“The Central Bank does not have a nominal or real exchange rate target under the current exchange rate regime,” it said, adding that the main determinants of foreign exchange supply and demand are economic fundamentals, monetary and fiscal policies, international developments and expectations.
“If the exchange rate movements permanently affect price stability, the Central Bank will give the necessary reaction with its instruments,” it said.
The U.S. dollar/Turkish Lira exchange rate hit its all-time peak at around 3.97 last month, while the 11-month average was 3.64.
One U.S. dollar traded for 3.03 Turkish liras on average last year, while the average exchange rate in 2015 was 2.72.
The bank also announced its schedule for next year’s eight Monetary Policy Committee (MPC) meetings and six reports for inflation and financial stability.