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ANKARA - Turkey's central bank raised its year-end inflation forecasts for this year and next to 44% and 21% respectively on Friday, and Governor Fatih Karahan vowed to keep policy tight to propel the disinflation process and hit targets.
The bank's previous inflation report three months ago forecast year-end inflation of 38% in 2024 and 14% next year. The revision underlines its tougher-than-expected battle against inflation that began with aggressive rate hikes 18 months ago.
Presenting a quarterly update in Ankara, Karahan cited improvement in core inflation trends even as service-related price readings are proceeding slower than anticipated. But even in that sector, inflation is gradually losing momentum, he said.
October inflation remained loftier than expected, dipping only to 48.58% annually on the back of tight policy and so-called base effects, down from a peak above 75% in May.
Monthly inflation - a gauge closely monitored by the bank for signs of when to begin rate cuts - rose by 2.88% in the same period on the back of clothing and food prices.
The bank has hiked rates by 4,150 basis points between June 2023 and March 2024, to 50%, as part of an abrupt shift to orthodox policy after years of low rates intended to stoke growth and a series of currency crashes that sent inflation soaring.
It warned last month that a bump in recent inflation readings increased uncertainty, prompting analysts to delay expectations for the first rate cut to December or January.
Karahan said the new inflation forecasts were based on maintaining tight policy, adding the bank would do "whatever is necessary" to wrestle inflation down, and pointing to what he called a significant fall in the annual rate since May.
He said the slowdown in domestic demand continues at a moderate pace and the output gap has continued to decline in the third quarter.
(Reporting by Ece Toksabay, Tuvan Gumrukcu and Nevzat Devranoglu; Writing by Ezgi Erkoyun; Editing by Jonathan Spicer, Daren Butler and Gareth Jones)