---
title: "Central Bank Lowers 2015 Inflation Expectation To 5.5 Pct. (2)"
date: "2015-01-27 12:34:01"
author: "DHA"
tags: "İstanbul"
canonical_url: "https://www.mynet.com/central-bank-lowers-2015-inflation-expectation-to-55-pct-2-180101662227"
original_url: "https://www.mynet.com/central-bank-lowers-2015-inflation-expectation-to-55-pct-2-180101662227"
---
# Central Bank Lowers 2015 Inflation Expectation To 5.5 Pct. (2)
ISTANBUL, January 27 (DHA) - Central Bank of Turkey (CBOT) lowered its 2015 inflation expectation to 5.5 percent in the January inglation report, 0.6 points lower than it was at 6.1 percent in October report, due to sharp decline in the oil prices.
CBOT Governor Erdem Basci said, 2015 inflation expectation was set at 5.5 percent, in a range of 4.1 percent to 6.9 percent, while 2016 inflation was set at 5.0 percent, in a range of 3.2 percent to 6.8 percent and seen to stabilize at 5.0 percent in the medium term, in a meeting organised to launch the bank's January inflation report.
Medium-term forecasts were based on the framework that a cautious approach would be adopted to make the improvement in inflation outlook permanent and the tight monetary policy stance will be maintained by keeping the yield curve flat, the Governor said. "It is assessed that the annual loan growth rate will continue to hover around the recent reasonable levels in 2015, also thanks to the macroprudential measures."
FOOD INFLATION TO BE AT 9.0 PCT.  
Annual inflation had decreased across sub-groups in the fourth quarter of 2014, the most remarkable slowdown occured in the energy group, which was led by the plunge in international oil prices, according to the CBOT. "The food group remained as the largest contributor to inflation" said the CBOT, holding the group's inflation expectation unchanged at 9.0 percent, it was in the October report.
FALL IN OIL PRICES  
"Core goods registered a slight fall in annual inflation, while the improvement in the underlying trend, which continued from the second quarter on, halted. Meanwhile, the fall in oil prices affected fuel-related services considerably and the underlying trend of services recorded a notable improvement."
"Briefly, the last quarter of the year was marked by evident effects of the falling oil prices on inflation" the CBOT said. "A remarkable improvement was witnessed in inflation expectations after a long period and the positive effect of oil prices on the headline inflation spilled over into many sub-groups, chiefly the services group."
"NOTABLE IMPROVEMENT" EXPECTED AT INFLATION  
Besides the international price developments that would contribute to the falling inflation, the gradual elimination of cumulative exchange rate effects, the decline in food inflation to past years’ averages and the tight monetary policy stance were envisaged to support the disinflation process in the upcoming period, said in the report.
"Against this background, it is projected that consumer inflation will register a notable improvement particularly in the first quarter, and inflation will recede to levels consistent with the target in mid-2015."
WEAK EXPORTS LIMITING GROWTH  
Following an interval of two quarters, private consumption expenditures recorded a robust recovery. In addition, the languishing trend in private investments, which lasted for a long time, reversed due to the increase in machinery and equipment investments. These two factors supported quarterly growth. However, the relatively weak course of  
exports limited the growth in this period.
LOAN GROWTH AT REASONABLE LEVELS  
Loan growth continued at reasonable levels in response to the tight monetary policy stance and the macroprudential measures, according to the CBOT report, while the composition of loans also continued to move in the desired direction. "While the annual growth rate of consumer loans hovers around low levels, commercial loans remain relatively more robust. This loan outlook not only limits medium-term inflationary pressures but also contributes to the improvement in the current account balance."
EXPORTS TO BE HIT BY WEAK EUROPEAN DEMAND  
The CBOT said expected the growth composition to change in favor of domestic demand in the upcoming period, due to shirinking external demand hit by weak growth in European countries, the largest export market of Turkey, and geopolitical developments in neighboring countries limits the growth of exports.
"Yet, with improved financial conditions and income effect of falling oil prices, domestic demand may see some recovery. In sum, external demand remains weak whereas domestic demand contributes moderately to growth" said in the report and went on as follows:
"LINGERING VOLATILITY ACCROSS GLOBAL FINANCIAL MARKETS"  
"There are downside risks to economic activity in the upcoming period. The lingering volatility across global financial markets and the sluggish course of confidence indices may cause private final demand to provide limited support to growth. In the case of an additional slowdown in external demand and a sizeable decline in global growth rates, the decrease in commodity prices will pull inflation down. Nevertheless, domestic economic activity may witness notable adverse effects at the same time. Under such circumstances, the CBOT will employ policy tools to support the economy."
