Istanbul, April 28 () - Central Bank of Turkey would continue implementing cautious monetary and fiscal policies and take steps on food supplies to keep inflation falling, Governor Erdem Başçı told the cabinet on late Monday.
"Inflation is on a falling trend" Başçı told ministers, according to the presentation published on the Central Bank’s website. “For the fall in inflation to continue, cautious monetary and fiscal policies should be maintained and measures regarding food supply should be adopted.”
Turkey's consumer prices rose by 1.19 percent in March, higher than the expectations of the economists at banks and brokerage companies, at around 0.87 - 0.89 percent. The consumer prices rose by 3.03 percent in three-month period since the begining of the year and 7.61 percent on annual basis, according to the Turkstat data, while the twelve months moving averages basis by 8.70 percent in March.
Turkey’s Central Bank left key interest rates unchanged last week, including the one-week repo rate at 7.50 percent as its policy rate, due to pressure from the President Tayyip Erdoğan and the government, ahead of a June parliamentary election, despite the lira’s slide to record lows risks fuelling inflation.
“Inflation expectations have still not yet reached a desirable level” Başçı said in his presentation, adding that a “partial correction” in food prices was likely in the second half of the year.
The lira has fallen around 15 percent against the dollar this year, underperforming almost every other major emerging market currency apart from the Ukrainian hryvnia, according to Thomson Reuters data.
Although the lira’s fall risks stoking inflation, the Central Bank has held off from what economists say are much-needed rate increases, opting instead to employ more obscure policy tools in an attempt to defend the currency.
Investors have been particularly worried about perceptions of political influence on monetary policy after President Tayyip Erdoğan repeatedly called for lower interest rates and said that those who defended high rates were “traitors.”