Turkey's central bank vows tight policy until inflation improves

Published 13.10.2017 20:26

The Central Bank of the Republic of Turkey (CBRT) said Thursday that it would maintain a tight monetary policy until the inflation outlook displayed a significant improvement.

"A tight policy stance will be maintained decisively to ensure the alignment of inflation outlook with the targets," Governor Murat Çetinkaya said in a presentation to investors at the International Monetary Fund (IMF) and World Bank meetings in Washington D.C, according to a statement on the bank's website.

Factors affecting inflation will be closely monitored, Çetinkaya said, adding that there would be further monetary tightening if needed.

The bank kept rates steady for the third straight meeting on Sept.14.

The country's consumer prices went up by 11.20 percent in September compared with the same month last year, according to the Turkish Statistical Institute (TurkStat) on Oct. 3.

Since the beginning of this year, annual inflation saw its lowest level in January - 9.22 percent - and hit its highest level of 11.87 percent in April.

The government is aiming to reach 5 percent inflation by 2020, down from 8.5 percent in 2016, and is predicted to be at 9.5 percent by the end of 2017, in accordance with the country's medium-term program announced on Sept. 27.

Çetinkaya also noted that inflation was expected to decelerate starting at the end of the year.

"Elevated levels of inflation and inflation expectations pose upside risks on the pricing behavior," the governor said. "The pass-through impact from cost factors has been one of the main drivers of inflation in 2017." The U.S. dollar/Turkish lira exchange rate saw a sharp hike - reaching around TL 3.79 - on Sunday after the visa tension with U.S. and stood at TL 3.6450 for Thursday's close.

Çetinkaya said leading indicators suggested a strong growth in the third quarter of the year. "Net exports have contributed positively during the first half and consumption demand supports economic growth," he said. "The ongoing recovery in tourism will support economic growth and external balance."

Turkey's economy grew 5.2 percent in the first quarter of this year and 5.1 percent in the second, compared to the same periods last year, according to TurkStat.

On Wednesday, the IMF upgraded its 2017 growth forecast for Turkey by 2.6 percentage points to 5.1 percent in 2017, up 2.6 percentage points over a previous forecast of 2.5 percent.

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