The Central Bank of the Republic of Turkey (CBRT) increased its year-end inflation forecast 1 percent yesterday. Speaking at a press conference to announce the bank's Inflation Report 2015-IV, CBRT Governor Erdem Başçı announced that they estimate inflation will become 7.9 percent by the end of the year, up from 6.9 percent in the previous forecast. The bank also revised the expectation for 2016 and predicted that inflation will become 6.5 percent in 2016, up from 5.5 percent in the previous forecast. Başçı said the bank will maintain its tight monetary policy until there is sufficient improvement in the inflation outlook."In the third quarter of 2015 annual consumer inflation posted a quarterly increase of around 0.75 points compared to the previous quarter and rose to 7.95 percent, remaining above projections of the July Inflation Report. Food prices and exchange rate developments are the main drivers of this rise in annual inflation," the report said. "The contribution of the rise in prices for unprocessed food increased in the quarter," it added. The Turkish lira has lost about 20 percent of its value against the dollar this year. "Annual core goods inflation posted an upsurge owing to the cumulative depreciation in the Turkish lira," the report said, indicating the devalued currency helped push up inflation.The underlying trend of core inflation indicators posted a slight decline compared to the previous quarter, yet remained at high levels, according to the report. The report also cited volatile global financial conditions as a factor helping to determine monetary policy. Volatility in global markets also had repercussions also in the economy, and financial indicators went through fluctuations amid domestic uncertainties. "In the third quarter, similar to other emerging economies, risk premium indicators and long-term rates in Turkey also increased," the report said. "Medium-term inflation expectations and repercussions of wage developments on inflation will be critical for the inflation outlook over the upcoming period. The establishment of the Committee on Monitoring and Evaluating Food and Agricultural Product Markets has been an important structural reform regarding inflation. Against this backdrop, inflation is expected to hover around current levels for some time due to exchange rate effects and start slowing afterward," the report added.These factors lead to the CBRT's tight monetary policy being maintained in the near future, the report said. "Accordingly, inflation is expected to be, with 70 percent probability, between 7.4 percent and 8.4 percent (with a mean of 7.9 percent) at end of 2015, and between 5 percent and 8 percent (with a mean of 6.5 percent) at the end of 2016. Inflation is projected to be close to 5 percent by the end of 2017 and to stabilize at around 5 percent in the medium-term."Road map for monetary policyThe CBRT released a road map for monetary policy on Aug. 18. The report yesterday reaffirmed that plan and provided further details. "The width of the corridor will be narrowed and the interest rate corridor will be made more symmetric around the one-week repo interest rate," the report said. This refers to the two interest rates used by the bank: The one-week repo rate – weeklong loans to banks – and the overnight lending rate. The CBRT, which previously lent money to banks using both rates, will prioritize the one-week repo rate, currently at 7.5 percent, a process that the bank refers to as "simplification" in the report. "During the simplification process, adjustments will be made in the funding composition to preserve the required degree of tightness in the monetary policy," the report said. Furthermore, the bank will adjust the supply of funds during the simplification process as needed. "Sustained fiscal discipline has become a fundamental element in reducing the sensitivity of the Turkish economy against external shocks in recent years. In the current environment of highly uncertain global markets, the value added from maintaining and further advancing these achievements is significant," it added.