In a quarterly inflation report, the new central bank governor raised the figure from 9.4% and promised to keep tight until the price crisis ended.
Turkey’s central bank has responded to the lira rate by raising Thursday’s end-of-year forecast to 12.2% from 9.4%, and its new ambassador said the probationary measures should be kept until price levels fall.
Commenting on the quarterly inflation report for the first quarter since his election last month, Governor Sahap Kavcioglu said the inflation rate, currently 19%, would be above inflation, which rose 16% last month and is expected to rise sharply.
Kavcioglu has sought to convince financial experts to take part as his predecessor, Naci Agbal, a well-known economist, has reduced the 5% economic growth over the next three years.
However, Kavcioglu’s appointment as chief executive of the bank last month, which lowered the curve by about 15%, raised prices through inflation and forced the bank to keep prices even though Kavcioglu had previously called for a reduction.
“We have given a definite guideline … stating that the number of points will be higher than inflation and we will continue,” the ambassador said in a statement. “We will continue to follow these rules.”
Kavcioglu, a former banker and professor, predicted that inflation would rise before April.
“The level of these points will remain above expectations until inflation shifts to the target,” he said.
After settling for a while, the Turkish currency weakened by about 1% to 8.25 against the US dollar at 13:15 GMT. It is one of the worst offenders in the coming markets this year, down 10%.
Serkan Gonencler, an economist at Gedik Yatirim, also described the bank’s end of the year as “expected” and under market sentiment, adding that it does not fully agree that the depreciation of the lira has raised foreign prices.
Rising prices are expected to rise above 17% this month and drop to 14% by the end of the year, according to a Reuters survey this week. Some researchers, including Goldman Sachs, expect to reach up to 18 percent.
Cry for weakness
Turkey has had a two-pronged increase in prices for customers over the past four years.
The fall in inflation, as well as electricity and other commodity prices, forced a rise in manufacturing prices by more than 31% in March.
Economists have raised hopes of rising inflation and foreign investors fled Turkey’s economy last month after President Recep Tayyip Erdogan ousted Agbal and appointed Kavcioglu as the fourth banker in less than two years.
The bank set fixed prices at 19% this month, although it also withdrew its initial commitment to help if necessary.
Researchers expect lower prices in the middle of the year and say that slowing down can reduce actual yields.
“The central bank seems to want to cut prices compared to the Naci Agbal era, but I don’t think they will cut prices as prices rise,” Gonencler said.
“The central bank is aware of the impact of the initial downturn, especially on the exchange rate,” he added.
The bank also raised inflation forecast for 2022 modestly to 7.5%, with 2022 food prices predicting 9.8%, compared to 9.4% in a previous report released three months ago.
Kavcioglu said anticipation of higher inflation would continue to erode prices, adding that economic activity should be reduced in the second quarter and that employment would be reduced.