Expectations for the annual Turkish consumer price inflation have ticked higher, according to a closely-watched survey published on Friday, increasing pressure on the central bank’s new governor to maintain the tight policy.
In the Central Bank of the Republic of Turkey (CBRT) survey, the forecast for end-2021 annual inflation rose to 13.12%, up from 11.54% a month ago.
Long an issue for the economy, the annual inflation edged higher in March to above 16%, signifying the need to maintain the tight monetary policy, while producer prices surged beyond 31%.
The Turkish lira is also expected to decline further against the U.S. dollar at the end of the year. The survey sees the year-end dollar/lira exchange rate at 8,5749, up from 7,9455 in March.
The CBRT already lifted its benchmark policy rate – the one-week repo rate – from 10.25% to 19% under former chief Naci Ağbal.
Ağbal was removed on March 20, after about five months on the job and two days after the higher-than-expected 200 basis points rate hike.
He was replaced by Şahap Kavcıoğlu, who has said tight monetary policy is needed for now, given high inflation.
Kavcıoğlu has said the bank remains strongly committed to the 5% inflation target by 2023.
Inflation is expected to peak at as high as 18% in April before dipping afterward.
President Recep Tayyip Erdoğan this week also reiterated determination to bring inflation down to single digits.
His remarks come a week before the CBRT holds the first policy meeting under Kavcıoğlu.
The bank is expected to hold interest rates at 19% at the meeting on April 15, according to initial surveys.
Kavcıoğlu has pledged to keep the policy rate above inflation until it was clearly on a permanent downward trajectory.
He also dismissed “prejudiced” expectations of an early rate cut in April or the following months.
Expectations for 2021 economic growth slightly dropped to 4.3%, down from 4.4% in the previous survey. The estimate for next year remained unchanged at 4.2%.
