Ankara: Turkish Finance Minister Nureddin Nebati has told economists that he expects the inflation rate to peak at around 40% in the coming months and not exceed 50% this year, according to attendees.
Nebati provided his most detailed outlook yet on consumer prices in 2022 at a meeting with 60 economists and analysts Saturday in Istanbul, according to the people, who asked not to be identified as the event n was not public. The minister said the inflation rate could not fall below 30% before the end of the year, one of the people said. The Turkish Finance Ministry declined to comment.
Turkey’s inflation rate hit 36.1% in December, the highest since the start of President Recep Tayyip Erdogan’s 19-year rule. Inflation expectations for the next 12 months jumped to 25.37% from 21.39%, according to the central bank’s January survey of market participants. Some Wall Street banks are predicting that last year’s currency crisis could push inflation past 50%.
The rise in prices was fueled by Turkey’s central bank cutting its key rate by 500 basis points in four consecutive meetings, before announcing a pause in its easing cycle on Thursday. The aggressive easing was demanded by Erdogan, who argued that lower rates would contain consumer prices and boost growth. The depreciation of the lira and the rise in global energy prices were the main drivers of inflation.
Turkey’s currency lost up to half its value in three months before stabilizing after the government introduced emergency measures in December, including a program to compensate book holders in the event of a significant drop in the currency.
Turkey’s central bank has also promised incentives for companies that convert foreign currency and gold deposit accounts into Turkish lira term deposits.
Nebati expects the moves to result in the conversion of $10 billion of corporate assets into pounds, which will help support the currency, the sources said.