CBRT Raises Its Inflation Forecast

CBRT Raises Its Inflation Forecast CBRT raises its inflation forecast. CBRT Governor Murat Uysal reported that inflation expectations for 2020 and 2021 were revised upwards. According to Bloomberg HT news, Central Bank of the Republic of Turkey (CBRT) has raised its inflation forecast for 2020. In addition, CBRT Chairman Murat Uysal emphasized tightening. Presiding the last inflation report of the year, CBRT Governor Uysal announced that they have lowered the year-end inflation forecast for 2020, which was previously announced as 8.9 percent, to 12.1 percent. President Uysal noted that all tools, including policy interest, will be used in the Q&A part of the meeting, if necessary. At the CBRT meeting, the inflation forecast, which was announced as 8.9 percent in the previous inflation report, was revised to 12.1 percent. Accordingly, the CBRT's inflation forecast for 2020 was above the realization forecast of 10.5 percent in the New Economy Program. The forecast for 2021 was increased from 6.2 percent to 9.4 percent. In addition, the expectation for food inflation was revised. Accordingly, the 2020 food inflation forecast, which was announced as 10.5 percent, was calculated as 13.5 percent. Answering the questions about the CBRT's monetary policy in the Q&A session of the meeting, Uysal underlined that the tightening trend continues and tools including policy interest can be used if necessary.   Within the framework of this question, Uysal continued as follows: “The monetary policy is taking the necessary steps regarding financial stability and price stability and will continue to take it. The Central Bank reacted strongly and began to see its effects. Our tendency to tighten continues, we have room to take new steps. Tight stance will be maintained in monetary and liquidity policies until a significant improvement is achieved in the inflation outlook. We provided flexibility in the framework of the monetary policy. The step taken in the late liquidity window does not mean permanent departure without simplification. The weighted average funding level is an important indicator showing the tightness of the CBRT. The weighted average funding cost and overnight interests should focus in this period."   Stating that swap rates can be used as a tightening tool, Uysal responded to the miscommunication criticism about monetary policy. Uysal said the following regarding the issue: “There may be parties we lack in communication, we make self-criticism. We will be in an effort to increase communication in the coming period. But we are going through extraordinary circumstances, it would be better if they were approached with fairness.”   Answering questions about the record-breaking dollar rate, President Uysal said: “The movement in the exchange rate is affected by many factors. As the CBRT, we do not target any nominal or real exchange rate. It will come to a point in line with macro realities in the medium term. In real terms, the TL is extremely worthless. The worthless TL poses risks to price stability. We have the opportunity to use all the tools we have for the inflation view. We can take the necessary steps, including policy interest, we do not limit ourselves.”