CBRT lifts year-end inflation forecast to 65.2 percent

Turkey’s central bank has lifted its inflation forecast for the end of 2022 to 65.2% from 60.4%, Governor Sahap Kavcioglu said on Thursday, marking the fourth rise this year, as he conceded that the bank had not been “very successful” in curbing price growth.

Turkish annual inflation climbed to a 24-year high of 83.45% in September after the central bank surprised markets by cutting rates twice in two months. The cuts came central banks elsewhere tighten policy, making Turkey an outsider with a deeply negative real rate.

The central bank cut rates again this month, by a larger than expected 150 basis points, after President Tayyip Erdogan called for single-digit interest rates by year-end. It said a similar cut would be delivered in November, ending the easing cycle.

The governor’s presentation indicated that inflation was seen peaking around 85% in late autumn before falling.

“Inflation will decrease rapidly on the back of continued supply, the maintenance of stability in exchange rates and the normalisation of pricing behaviour,” Kavcioglu told reporters at a news conference in Ankara.

Asked whether the bank had succeeded in lowering inflation, Kavcioglu said, “We cannot consider ourselves very successful. God willing, the decisions we have taken will make us successful in a short time.”

The bank also raised its end-2023 mid-point inflation forecast to 22.3% from 19.2%.