ECONOMY

Turkey's CB vows tight policy until inflation improves

TURKEYS CB VOWS TIGHT POLICY UNTIL INFLATION IMPROVES

Turkey's Central Bank said on Thursday that it would maintain its monetary policy tight until the inflation outlook displayed a significant improvement.

"Tight policy stance will be maintained decisively to ensure the alignment of inflation outlook with the targets," Governor Murat Cetinkaya said in a presentation to investors at the International Monetary Fund and World Bank Meetings in Washington D.C, according to a statement on the bank's website.

Factors affecting inflation will be closely monitored, Cetinkaya said, adding there would be further monetary tightening if needed.

The bank kept rates steady for the third straight meeting on Sept.14.

The country's consumer prices went up by 11.20 percent in September compared with the same month last year, according to the Turkish Statistical Institute (TurkStat) on Oct. 3.

Since the beginning of this year, the annual inflation saw the lowest level in January -- 9.22 percent -- and hit the highest level at 11.87 in April.

The government aims to reach 5 percent inflation in 2020, down from 8.5 percent in 2016, and is predicted to be at 9.5 percent by the end of 2017, in accordance with the country's medium-term program announced on Sept. 27.

Cetinkaya also noted that inflation was expected to decelerate starting from the end of the year.

"Elevated levels of inflation and inflation expectations pose upside risks on the pricing behavior," the governor said. "The pass-through impact from cost factors has been one of the main drivers of inflation in 2017."

The U.S. dollar/Turkish lira exchange rate, which saw a sharp hike -- around 3.79 liras -- on Sunday after the visa tension with U.S. stood at 3.6450 at Thursday's close.

Cetinkaya said that leading indicators suggested a strong growth in the third quarter of the year.

"Net exports have contributed positively during the first half and consumption demand supports economic growth," he said. "The ongoing recovery in tourism will support economic growth and external balance."

Turkey's economy grew 5.2 percent in the first quarter of this year and 5.1 percent in the second, compared with the same periods last year, according to TurkStat.

On Wednesday, IMF upgraded its 2017 growth forecast for Turkey by 2.6 percentage points to 5.1 percent in 2017, up 2.6 percentage points over a previous forecast of 2.5 percent.

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