UPDATE - Turkish Central Bank keeps inflation forecasts constant

UPDATE WITH MORE REMARKS FROM CENTRAL BANK'S GOVERNOR

By Tuba Sahin

ANKARA (AA) - Turkey's Central Bank on Tuesday kept the country's year-end inflation forecasts at 14.6% this year, 8.2% next year, and 5.4% in 2021.

The inflation rate will fluctuate between 12.1% and 17.2% through the end of this year, the bank's governor told a news conference in Istanbul to release the bank’s quarterly inflation report.

Saying that the improvement in the current account balance will continue in the coming days and a partial recovery in economic activity was seen in the first quarter, Murat Cetinkaya added:

"We project the inflation rate will stabilize at 5% in the medium term under a tight monetary policy stance and enhanced policy coordination."

Taking into account hikes in unprocessed food and Turkish lira-denominated import prices, the improvement in the underlying trend of inflation under a tight monetary policy stance consistent with the targeted path, the widening of the output gap, and downward revisions to the administered price hikes offset these upward effects, Cetinkaya said.

"Assumptions for food prices inflation have been revised upwards due to realized inflation figures in the first quarter of the year that were significantly above the historical averages as well as to risks arising mainly from accumulated cost pressures," he said.

The bank increased its food inflation forecast to 16% for 2019, up from 13% in the previous report, Cetinkaya noted.

Food inflation next year is expected to reach 11%, he said.

The forecasts are based on a framework in which increases in the country's risk premium and financial volatility since the previous report period would be partially recovered and no additional shocks would be felt, he said.

Stating that crude oil prices in international markets in the first quarter exceeded the assumptions in the January Inflation Report, Cetinkaya said:

"The average crude oil price assumption of $63.1 presented in the previous report has been revised upwards to $67.8 for 2019."