Turkey's Central Bank on Thursday increased the country's year-end inflation forecast to 14.1% for this year, up from 12.2% in its previous report.
The bank also hiked the inflation forecast for 2022 to 7.8%, up from 7.5%, while keeping the target of 5% for 2023, Sahap Kavcioglu, the bank's governor, told a meeting for the release of the bank's third annual inflation report this year.
Kavcioglu underlined that Turkey's Central Bank continues to use all tools with determination and that its policy stance will continue to be formed around inflation.
The Central Bank expects inflation to drop significantly in the third and fourth quarters of 2021, he noted.
The resolute continuation of the tight monetary policy stance in line with the priority of reducing inflation serves as an important buffer against volatilities in exchange rates, he underlined.
"We think that social consensus and joint efforts are of great importance to reduce inflation and achieve a permanently lower inflation rate."
In addition to an appropriate monetary and fiscal stance, it will also be important to reduce structural rigidities that delay or complicate the decline in inflation, as well as to take measures to boost competition to avoid a deterioration in pricing behavior.
MICRO-LEVEL ANALYSIS OF PRICING BEHAVIOR
Kavcioglu also underlined that micro-level analysis of pricing behavior plays an important role in better understanding the effects of period-specific conditions on inflation dynamics.
"In this direction, while taking the necessary steps in macroeconomic policies to combat inflation in coordination, we must also focus on the micro dimension of the fight against inflation."
Current findings clearly demonstrate the importance of inter-institutional coordination in normalizing unconventional pricing, he added.
The Central Bank chief cited high-frequency data which he said indicates that growth in the second quarter will be very high due to base effects, adding: "We expect a current account surplus through the rest of 2021 backed by strong rises in exports and a revival of tourism."
Underlining that confidence indices showed general increases both in June and July, he stated that the services sector was the driving force in this recovery.
Pointing out the importance of the pace of vaccination, he said: "If we bring the vaccination to a good point, I think that there is no danger of closure in the coming period."
Having gained momentum, foreign trade will continue uninterrupted, he said, concluding with a prediction that there will be no problems in the economy.
Turkey's annual inflation rate was at 17.53% for June, climbing 1.94% on a monthly basis.
The bank kept its one-week repo rate -- also known as the policy rate -- steady at 19% in July, for a fourth month after raising it by 200 basis points in March.