Turkish Cb Hikes 2015 Inflation Expectation To 6.8 Percent (2)

Gülseli Kenarlı / Istanbul, April 30 (DHA) - Central Bank of the Republic of Turkey (CBRT) raised its 2015 inflation expectation to 6.8 percent in its second Inflation Report, from 5.5 percent in the first one launched on January 27.

"Medium-term forecasts are based on the framework that cautious monetary policy stance will be maintained by keeping the yield curve flat until there is a significant improvement in the inflation outlook" Erdem Başçı, CBRT Governor told a news conference on Thursday.

"Moreover, the annual loan growth rate is envisioned to continue to hover around the recent reasonable levels in 2015, also thanks to the macroprudential measures" he said and added the new expectations as follows:

"Accordingly, inflation is expected to be, with 70 percent probability, between 5.6 percent and 8 percent, with a mid-point of 6.8 percent at end-2015 and between 3.7 percent and 7.3 percent, with a mid-point of 5.5 percent at end-2016. Inflation is projected to stabilize around 5 percent in the medium term."

"The end-2015 inflation forecast, which was presented as 5.5 percent in the January Inflation Report, was revised upwards by 1.3 points" Başçı said and gave the following details on the justufications:

"This revision was led by the higher-thanprojected oil prices compared to the figures in the January Inflation Report besides the import prices in lira. Accordingly, the revision in oil prices and the movements in lira-denominated import prices are estimated to push the year-end inflation forecast by 0.4 and 1.0 points, respectively. The downward revision in economic activity and the output gap, on the other hand, lowered the end-2015 inflation forecast by 0.1 point. Moreover, the end-2016 inflation forecast, which was set as 5 percent in the previous report, was revised upwards to 5.5 percent. Of this revision, 0.3 points are attributed to the lagged effects of the developments in TL-denominated import prices and 0.2 points are due to the upward revision in the oil prices for 2016."

Base effects would remain as the determinant factor on the course of inflation in the rest of 2015, he said, causing a rise in annual inflation starting from August. "Accordingly, annual inflation is envisaged todecline until the third quarter, and increase slightly afterwards, reaching 6.8 percent in the last quarter" he said.

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