Turkish Central Bank leaves inflation forecast unchanged

By Tuba Ongun

ANKARA (AA) — Türkiye's Central Bank on Thursday maintained its year-end inflation forecasts for both 2023 and 2024.

Consumer prices are expected to increase 22.3% this year and 8.8% next year, Governor Sahap Kavcioglu told a news conference marking the release of the bank’s second quarterly inflation report in 2023.

Kavcioglu stressed that despite the slowdown in the price rise, inflation rates remained above the bank's forecast range, led by unprocessed food prices.

Referring to the bank's emphasis on the Turkish lira over foreign currencies, Kavcioglu said: "We will continue to use all the tools of our Liraization Strategy to support an inflation path consistent with our forecasts. Thus, we have not changed our forecasts, and have kept the year-end inflation forecast constant at 22.3% for 2023 and 8.8% for 2024."

Falling for a sixth consecutive month, Türkiye's annual consumer inflation rate slowed to a 16-month low of 43.68% in April.

"The disinflationary process is driven by the exchange rate stability that was achieved as a result of our effective policies, the improvement in expectations, and the slowdown in global commodity prices," Kavcioglu explained.

Touching on the recent turmoil in US and European banking, he said the Turkish banking sector maintains its robust outlook, thanks also to its "holistic strategy."

"Various criteria such as the return on assets and equity, the ratio of liquid assets to short-term liabilities, capital adequacy, and the ratio of non-performing loans to total loans, which are key banking indicators, also confirm the robustness of the banking sector," the governor added.

The "liraization" strategy was launched in 2022 to reinforce the use of the Turkish lira in the country, as part of the Turkish economy model, which envisages investment, employment, production, and export-oriented development for the continuation of sustainable growth.

The lira deposit ratio grew to the current level of 59.7% from 35.6% in January 2022, Kavcioglu said.