Central Bank foresees 6.5 pct inflation in 2016

Central Bank foresees 6.5 pct inflation in 2016

Central Bank foresees 6.5 pct inflation in 2016

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The Turkish Central Bank has forecast the country’s inflation to stand at 6.5 percent at the end of 2016, according to the bank’s governor, Erdem Başçı. 

Addressing a press conference for the presentation of the bank’s 2016 monetary and exchange rate policy in Ankara, Başçı said the bank would maintain its tight monetary policy, while ensuring foreign exchange liquidity.

Başçı did not discuss plans to narrow the difference between Turkey’s one-week lending rate and overnight lending rate, known as the interest rate “corridor.” 

The Central Bank had announced these plans on Aug. 18, but has not provided additional details since.
Inflation in Turkey rose to an annual 8.1 percent in November from 7.58 percent in October, the Turkish Statistics Institute (TÜİK) reported on Dec. 3.

The governor said he believed the inflation target should be set together with the Turkish government.

According to Başçı, the target for inflation set by the bank for the next three years would remain at 5 percent, with an uncertainty band of 2 percentage points in both directions.

He said the expected minimum wage hike, to 1,300 Turkish Liras ($446) per month, from the current 1,000 liras ($342) per month, could impact the year-end inflation prediction of the bank by 1.5 points, as an increase in consumer demand is expected to push inflation higher.

Başçı emphasized the bank had prepared measures to deal with the expected rise in U.S. interest rates in December, as well as for fallout from the European Central Bank’s stimulus program, without providing details.

“Measures that have been taken have increased the resilience of the economy against external shocks,” he said.

According to Başçı, improvement in the current account balance will continue. The country’s 12-month rolling current account deficit stood at $40.6 billion, or about 5 percent of GDP, at the end of September 2015.
Russian sanctions against Turkish fruit and vegetable exporters may help ease Turkish inflation, Başçı said, as the increased supply in Turkey will reduce prices.

Moscow has approved a raft of sanctions in retaliation for Ankara’s downing of one of its fighter jets which reportedly violated Turkish airspace on Nov. 24 after it ignored repeated warnings.

Russia will no longer permit the export of fresh fruit and vegetables, which accounts for about $1.27 billion annually, according to the country’s Agriculture Ministry.