Turkey’s central bank on Thursday raised its inflation forecasts for the end of 2023 and 2024, with a peak expected next May as high as 75 percent, the state-run Anadolu news agency reported.
Central Bank Governor Hafize Gaye Erkan announced the revised projections at a press conference at the central bank on Thursday where she announced the bank’s fourth quarterly inflation report this year.
Erkan announced a new end-2023 estimate of 65 percent, up from a previous forecast of 58 percent, and said price growth will finish next year at 36 percent in a revision from 33 percent. Erkan said she expects inflation to decline from the second half of next year while lowering the inflation forecast for end-2025 to 14 percent from a previous 15 percent.
“Getting high and volatile inflation under control will be a long and difficult process. We will continue to use all tools available to ensure [the lowering of inflation],” Erkan said in her speech, adding that monetary tightening will continue until there is a visible improvement in inflation.
The central bank raised its policy rate by 500 basis points to 35 percent as expected last Thursday, tightening aggressively for a third straight month as it steps up efforts to rein in inflation that has soared for years.
The bank said it was taking its main lending rate to 35 percent from 30 percent because “inflation readings were above expectations” over the past three months.
Turkey’s official annual inflation rate peaked at 85 percent last October and climbed back up above 60 percent last month.
Annual inflation hit 61.5 percent in September, mainly due to depreciation of the lira and an increase in taxes on fuel. The bank has hiked interest rates by 2,650 basis points in an abrupt policy U-turn since Erkan was hired in June.
The bank has now more than quadrupled borrowing costs since President Recep Tayyip Erdoğan dropped — or at least put aside — his long-standing objection to the idea that raising interest rates helps fight inflation.
The Turkish lira has weakened some 33 percent so far this year.