Market News

By Beril Akman

(Bloomberg) -- Turkey’s central bank raised its inflation forecasts for this year and next, bringing them closer to market expectations after price gains exceeded estimates for two consecutive months.

According to the revised outlook, officials now see inflation at 44% at the end of this year and at 21% by the end of 2025, up from previous estimates of 38% and 14%, respectively. Those forecasts serve as short-term goals for authorities as they try to hit the official target of 5% in the longer term. Economists expect price gains to slow from their current level of just under 49% to 44.2% by the end of December and to 23% a year later, according to a Bloomberg survey of analysts in October.

Governor Fatih Karahan presented the central bank’s fresh outlook for the economy in his quarterly inflation report unveiled in Ankara on Friday. He is expected to answer questions from economists, who are looking for an indication of when Karahan’s Monetary Policy Committee might start cutting the benchmark rate after having kept it at 50% since March. Most have pushed expectations for the beginning of the easing cycle further into the future, with many economists now seeing rate reductions before 2025 highly unlikely.

“We will continue our tight policy stance until price stability is restored,” Karahan said during his speech. The bank wants to see a marked and lasting decline in monthly price dynamics, he added.

The lira was little changed as the governor spoke, trading 0.3% lower at 34.3539 per dollar as of 11:00 a.m. in Istanbul. Turkey’s main stock index Borsa Istanbul 100 extended gains to 0.4%.

--With assistance from Baris Balci.

(Updates with comments from governor, markets data from fourth paragraph.)