"We project that credit conditions compatible with the disinflation process and stable exchange rates within our current policy framework will ensure a stronger improvement in the underlying trend of inflation," he said.
His view that inflation will continue to decline over the remainder of the year stands in contrast to market expectations.
When asked about the gap between the forecasts, Kavcioglu said the current divergence of market expectations will converge towards the central bank's outlook.
The median estimate in the latest Reuters poll for annual inflation in Turkey at end-2023 stood at 46.5%, with an expected rise in the second half of the year. Some economists expect it to have touched its lowest level this year in April. Speaking in Ankara during the central bank's inflation report presentation, Kavcioglu reiterated that inflation will fall on the back of current account surplus and the central bank will continue policies supporting this outcome. "We are determined to record a current account surplus. We will continue to do this in the second half of the year. Turkey will enable A lasting fall in inflation with A current account surplus," Kavcioglu said.
The cost of living crisis has eaten away at household savings in Turkey and also hit Erdogan's popularity. Polls show him trailing his main challenger in the May 14 elections. Some economists expect Erdogan to shift towards more orthodox economic policies after the elections.
Kavcioglu, when asked about a possible change in
government, said current central bank policies are not temporary
and would continue regardless of who wins the elections.
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Underestimating inflation Underestimating inflation ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Additional reporting by Ezgi Erkoyun; Editing by Susan Fenton
and Mark Heinrich)
