Turkey's inflation target is 4 percent: Central Bank

"Government projects the inflation target as 4 percent. However, median of year-end estimation is 6.1 percent within the scope of the assumptions in the recent inflation report," Turkish Central Bank Governor Durmus Yilmaz said on Thursday.

Turkey's inflation target is 4 percent: Central Bank

"Government projects the inflation target as 4 percent. However, median of year-end estimation is 6.1 percent within the scope of the assumptions in the recent inflation report," Turkish Central Bank Governor Durmus Yilmaz said on Thursday.

Yilmaz, who was addressing the Erzurum Chamber of Commerce and Industry, said "the studies indicate that inflation rate will be 3 percent, below the target at the end of the second quarter of 2008."

Yilmaz said Central Bank conducted a survey among financial and real sector representatives to assess inflation estimations, stating that, "according to the survey, the participants estimated year-end inflation as 7.16 percent, 6.37 in the coming 12 months, and 5.40 percent in 24 months. Government's target is 4 percent. There is a difference between our expectations and expectations of the market. The market does not believe that we will drop the inflation rate to 4 percent."

Yilmaz also indicated that fundamental policy means of the Central Bank were short term interest rates. "Interest rates should not be changed before the planned time and without appropriate conditions are provided. In case a decision is taken about the interest rates prior to appropriate conditions, there will be hesitations in dealing with inflation, Turkish money will lose value, budgetary discipline will be disrupted, fragility in economy will increase and vicious circle against foreign shocks will start," he added.

Underlining that there was a relationship between foreign exchange rates and inflation, Yilmaz said, "the more the Turkish lira gains value, the more the contribution to fight against inflation rises. Rates of foreign exchange are important in fight against inflation. However, the connection between them appears in market conditions."

Yilmaz said Turkey implemented fluctuating foreign exchange rates regime, stating that, "Turkey has experienced 10 fluctuations since 2002. Dimension of the fluctuations shrinks every year. This is an indication that macro economic reforms, which are actually implemented, will further strengthen the basis of the Turkish economy and makes it more solid against shocks."

Yilmaz also said unregistered economy in Turkey should be prevented.


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