Turkish Central Bank revises inflation forecasts upward, vows to maintain containment efforts

On Thursday, the Turkish Central Bank revised its inflation forecast for the end of the year, projecting it to reach 38 percent. Governor Fatih Kara Khan emphasized the bank’s commitment to taking decisive measures to prevent further deterioration in inflation, reaffirming its stance on tightening monetary policy.

Presenting the quarterly report on inflation, Kara Khan noted that inflation surged to 69.8 percent in April and is expected to peak this month at 75 to 76 percent. Subsequently, a downtrend in inflation is anticipated alongside a moderation in domestic demand.

The central bank adjusted its average consumer price inflation forecast for the end of 2024 from 36 percent to 38 percent. However, the forecast for the end of 2025 remains unchanged at 14 percent, with inflation projected to decline to nine percent by the end of 2026.

Kara Khan attributed the upward revision of year-end forecasts to an unexpected four-percentage-point increase in inflation during the first four months of the year.

Despite aggressively raising interest rates by 4,150 basis points since last June, the central bank opted to maintain rates at 50 percent in April, allowing time for its earlier tightening measures to take effect. This included a 500 basis point hike in interest rates in March.

Reiterating the bank’s commitment to further tightening policy if necessary, Kara Khan emphasized the persistent rise in inflation over the years, exacerbating the cost-of-living crisis for Turkish citizens.

Following the release of the report, the Turkish lira remained relatively stable at 32.2325 against the dollar, hovering near an all-time low.