Turkish central bank raises 2023 inflation target to 58%

30 Jul '23

2 min read

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The Turkish central bank recently revised its year-end inflation forecast upward for 2023, 2024 and 2025.
The annual consumer inflation is projected to hit 58 per cent this year, revised up from the earlier 22.3 per cent.
The stronger-than-expected domestic demand pushed the year-end inflation forecasts up by 1.3 points for 2023 and by 0.4 points for 2024.

The Turkish central bank (CBRT) recently revised its year-end inflation forecast upward for this year, next year and 2025. The annual consumer inflation is projected to hit 58 per cent this year, revised 35.7 points up from the previous forecast of 22.3 per cent, bank governor Hafize Gaye Erkan said.

The end-2024 forecast was raised to 33 per cent from 8.8 per cent earlier, while the end-2025 forecast to 15 per cent from 5 per cent earlier, Erkan told a press conference, while releasing the central bank’s third quarterly inflation report for this year.

Turkish lira-denominated import prices, output gap, food prices, administered prices and unit labour cost and forecast deviation and change in forecasting approach were the reasons the upward revisions.

"Changes made to other economic policies, such as transfers to households, taxes, wages and administered price adjustments, raised the end-2023 inflation forecast by 7.5 points and end-2024 inflation forecast up by 3.6 points," she was quoted as saying by Turkish media reports.

The stronger-than-expected domestic demand pushed the year-end inflation forecasts up by 1.3 points for 2023 and by 0.4 points for 2024, she noted.

The central bank raised its policy rate by 250 basis points to 17.5 per cent some time back, continuing to reverse low-rates policy, but with a hike that was smaller than expected by markets.

She foresees a significant improvement in the current account balance in the second half, with selective credit tightening measures balancing domestic demand, Erkan added.

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