Turkish Central Bank to submit open letter to gov't
by Daily Sabah with AA
ISTANBULJan 10, 2017 - 12:00 am GMT+3
by Daily Sabah with AA
Jan 10, 2017 12:00 am
The Central Bank of the Republic of Turkey (CBRT) will write an open letter to the government clarifying reasons for the inflation rate spike, that saw the 5 percent forecast made in the "2016 Monetary and Exchange Rate Policy" report hit 8.5 percent last year.
In accordance with Article 42 of the Central Bank Law, if the inflation rate deviates significantly from the target, the CBRT is required to clarify the deviation and provide details on precautions to the government in writing and inform the public.
In the CBRT's main policy statement published on Dec. 9, 2015 and titled, "Monetary and Exchange Rate Policy in 2016,"it recalled that the main purpose of the Central Bank was to provide price stability, and that the inflation target for 2016, 2017, and 2018 was determined at 5 percent within the framework of the agreement reached with the government. The statement suggested that the uncertainty interval, the indicator of the CBRT's obligation for accountability, was at 2 percentage points in both directions. If the realized inflation remains out of the uncertainty interval at the end of the year, an open letter will be written to the government. The CBRT will now write an open letter to the government since the 2016 inflation rate was realized at 8.53 percent, which is clearly way above the initially targeted level of 5 percent.
The letter signed by CBRT Governor Murat Çetinkaya and a deputy governor will be received by the Deputy Prime Minister Mehmet Şimşek on behalf of the government. According to analysts, there were many reasons behind the inflation rate spike, with price adjustments and oil prices rising above $55 among the major reasons. Analysts also suggested that the Gülenist Terror Group's (FETÖ) attempted coup on July 15, geopolitical risks, and the depreciation of the Turkish lira with the impact of the rise in the dollar index also had negative impacts on the inflation rate.
Although the CBRT had determined the initial inflation target at 5 percent, in the latest inflation report released last October, it revised the 2016 target as 7.5 percent. It stated that this inflation rate would be down to 6.5 percent in 2017 and to 5 percent in 2018. Accordingly, the bank said, with a 70 percent probability, the inflation would stand between 7 and 8 percent at the end of 2016.