Turkey’s central bank on Monday said they expected the country’s inflation rates to decline through the following few months, stressing that the upward pressure on prices that has emerged from a weaker Turkish lira will be temporary.
According to last week’s Turkish Statistics Institute (TurkStat) data, the annualized inflation of consumer prices increased to 10.61 percent in January, hitting the highest level since November 2008. The bank released their monthly price developments report on Monday, analyzing the January inflation indices. Reiterating its commitment to price stability, the bank said in its report that January saw the adverse impacts of a depreciating TL and indicated this is not expected to continue for long. The bank has set its inflation target to hover around 5 percent this year, in line with the government’s Medium-term Economic Program (OVP). The currency developments have a profound impact on central bank maneuvers. Observers last week argued to Today’s Zaman the bank might feel compelled to take some proactive measures to curb the potentially adverse impacts of an appreciating TL against the US dollar. On Monday, $1 traded at TL 1.76 as the local currency maintained its comeback from an earlier historic high of TL 1.9 against the greenback. In a report following last week’s January inflation figures, the bank said it would consider a revision of its monetary policy if a possible deterioration in fiscal balance threatens the medium-term inflation outlook. Also drawing attention to a volatile global market atmosphere, the bank said, “Current circumstances necessitate a flexible approach in monetary policy.” The bank’s Monday report also stressed that the price increase in the services sector “remained limited” in January. They attributed a 0.94 percent price hike in services to fast-increasing transportation costs. Underlying this were the surging crude costs, it said. The bank also drew attention to an upward pressure in durable goods prices. The highest growth in durable products prices over the preceding month was of furniture at 3.27 percent and automobiles at 1.82 percent.