– Central Bank increased the inflation forecast rate from 6.5 to 7.5 by one point for 2016, having set “5 percent target” for the new year.
“In 2018, the inflation will gain stability at 5 percent, after declining from 7.5 percent in 2016 to 6 percent in 2017” Central Bank Governor Erdem Başcı announced in a meeting to launch the first Inflation Report of the year, on Jan. 26.
Başçı has revealed fourth and last inflation forecasts on October 28, 2015, having estimated the inflation between “5.0 percent” and “8.0 percent”, marking “6.5 percent” as the mid-point in 2016.
The inflation in 2015 has seen 8.81 percent, despite the “5 percent” target of Central Bank. A letter obligated to address the government to explain the “target was missed” will be announced by the Central Bank today, said Başçı.
“We will use all existing tools that we have, in a bid to approach the 7.5 percent forecast, in the end of the year” vowed Başçı, underlining they would “pay great effort” to avoid double-digit inflation numbers in the first quarter of this year.
“It is impossible to state that price stability is achieved, at this point. We have decreased oil price forecasts from 54 dollars to 37 dollars for 2016. Food prices increase forecasts were escalated from 8 percent to 9 percent. The food committee has addressed red meat and bread prices, on which we expect a statement. A strong will exists on this issue ” he said.
Central Bank Governor told it was too early to shift to single interest rate and suggested adjustments though daily liquidity policies, until uncertainties are eased.
“Single interest rate could be reconsidered if global uncertainties reduce” he said. Turkish Central Bank, uses an "interest rate corridor" to control money supply, in its struggle to reduce the high inflation, with marginal funding rate as the ceiling rate at 10.75 percent and borrowing rate as the base rate at 7.25 percent, besides the policy rate, which is at 7.5 percent currently.
The Bank plans to put monetary policy simplification steps forward, when "decline in volatility prove persistent", which is expected to include a "single rate" to be used as the "policy" rate.