NEWS Finance        28/01/2021

Turkish Central Bank keeps its inflation forecast for 2021 unchanged at 9.4%

The Turkish Central Bank has maintained its inflation forecast for 2021 yearend at 9.4%. The Bank also forecast an inflation rate of 7% for 2022 yearend, and 5% for 2023 yearend.


In the Bank’s 2021-I Inflation Report of January 28th, 2021, it was noted that economic activity which “posted a significant domestic demand-driven recovery in the third quarter of 2020” due to “the cumulative effects of high credit growth during the pandemic”,  “continues to have an adverse effect on the current account balance and inflation.”  The Bank is aware that “domestic demand conditions, cumulative cost effects- in particular the exchange rate-, increasing international food and other commodity prices and high levels of inflation expectations continue to affect the inflation outlook adversely”. However, the Bank states its “price stability-oriented monetary policy as critical” and reiterates its wish “to decisively implement a full-fledged inflation targeting strategy in 2021” and “make monetary policy decisions in pursuit of the primary objective of price stability”. The Bank believes that “on the back of the effects of the strong monetary tightening, demand and cost factors that affect inflation are expected to weaken gradually”.


The annual inflation rate as of yearend 2020 was 14.60%. Whether the Turkish Central bank will be able to bring down this rate to 9.4% by the end of 2021 depends largely on the Turkish government’s determination to maintain its new fiscal tightening in face of the on-going economic recession worsened by the pandemic and global trade contraction. Turkey’s new economic team’s declaration that its priority is to maintain price stability has boosted market confidence, with the USD/TL rate stabilising between TL 7.30 and TL 7.40.  


Click here for Turkish Central Bank’s “2021-I Inflation Report January 28th, 2021 - Overview”




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