Turkey's central bank ramped up its year-end annual inflation forecast to 23.2% from a previous 11.8%, but its chief dismissed the notion that a series of unorthodox interest rate cuts have sent inflation soaring and the lira tumbling.
When asked about the central bank's independence at a news conference, Governor Sahap Kavcioglu, who has been pressured to slash rates by President Recep Tayyip Erdogan, said the bank sets policy based on data.
The central bank has slashed its policy rate by 500 basis points to 14% since September, setting off a full-blown crisis last month in which the lira touched a record of 18.4 versus the dollar before rebounding sharply.
The exchange-rate volatility helped send inflation soaring to 36% in December, and most analysts expect it to approach 50% in coming months before easing to about 27% by the end of the year, according to a Reuters poll.
But the central bank, which has consistently undershot actual inflation in the last few years, said inflation was heading lower and predicted a mid-point of 23.2% for the consumer price index at end-2022.
A chart shared by the bank showed it expects inflation to approach 50% in January, peak near 55% in May and then drop sharply in the third quarter, which Kavcioglu attributed to the government's new economic strategy.
The bank also forecast 8.2% inflation for the end of 2023 and a return to its official target of 5% a year later.
Enver Erkan, chief economist at Tera Yatirim, said inflation risked outstripping the central bank's forecast due to the volatility of food and energy prices.
