Inflation expected to uptick in short term: CB survey

ANKARA (AA) – The year-end consumer price inflation forecast rose to over 9 percent, a broad-based survey by Turkey’s Central Bank said Monday.

The Survey of Expectations for March 2017 report which was carried out with the participation of 76 professionals and senior managers of the real and finance sector, revealed that the median estimate of professionals for year-end consumer prices inflation was 9.08 percent.

The median estimate of professionals in February was 8.87 percent, significantly lower than the March forecast.

For the last four months, the annual inflation rate has risen, going from 7 percent in November to 10.13 percent in February, the first time it has hit double digits in nearly five years.

The U.S. dollar to Turkish lira rate, which saw a historic high of 3.9423 in early January, is a challenge for Turkish economic officials as the depreciation meant more expensive imported products and price hikes.

But Central Bank Governor Murat Cetinkaya last Wednesday stressed that the period of high FX volatility seems over thanks to bank measures such as cutting foreign exchange reserve requirement ratios, the establishment of a foreign exchange swap mechanism, and bypassing one-week repo auctions to tighten lira liquidity.

“Pass-through from recent exchange rate developments may lead to upside inflationary pressures in the short term; yet, with the support of the tight monetary stance, inflation is expected to trend downwards by mid-year,” Cetinkaya said.

The dollar/lira rate was down as much as 3.60 by late February after Central Bank intervention.

The report showed the inflation forecast for March 2018 was 8.15 percent, versus 7.7 percent for March 2019, suggesting that forecasters expect inflation to ease in the mid-term.

The dollar/lira rate, widely seen as significant gauge for economic confidence, was forecasted to be at 3.8495 by year-end, sharply down from 3.9194 in the previous forecast in February.

On the other hand, the current account deficit, a chronic headache of Turkey’s economy for some time, was forecast at $35.8 billion compared to $35.6 billion in the previous survey. In 2018 the reading is expected to be $38.5 billion.

The professionals participating in the survey estimated Turkey’s GDP to grow 2.9 percent in 2017 and 3.5 percent next year.