Central Bank: Inflation Seen To Move Towards 5 Pct. Target İn 2015

Central Bank of Turkey (CBOT), said expected the inflation to display a notable decline and move towards the 5.0 percent target in 2015, after missing the 2014 target by 3.17 points.

CBOT sent a letter to the government, to describe how and why it missed the inflation target in 2014, due to the Article 42 of the Central Bank Law, on Tuesday.

"This text elaborates on the reasons why the target was missed and explains the measures already taken, and to be taken, to bring inflation back to the target" said the CBOT in the letter sent to Deputy Prime Minister Ali Babacan, signed by the Governor Erdem Basci and Deputy Governor Mehmet Yorukoglu.

As stated in the main policy document titled, Monetary and Exchange Rate Policy in 2014, the inflation target for 2014 was set jointly with the Government as 5 percent. In the same document, it was also indicated that the Central Bank would write an open letter to the Government should end-year inflation exceed the target significantly, by more than 2 percentage points in either direction. Turkey's inflation rose to 8.17 percent at end-2014, notably exceeding the target.

"Inflation exceeded the target in 2014 due to the developments in the exchange rate and food prices besides the adjustments in administered prices, the CBOT said in the letter, adding that, it had responded to the increase in inflation by a tight monetary policy stance, which was accompanied by the liquidity policy, when required.

"Effects of the enforced measures appeared as of the second half of 2014" the CBOT said in the letter, adding that the trend in inflation which had recorded a remarkable fall and seen improvement in expectations. "In addition to the monetary policy and macroprudential measures, the fast decline in oil prices will considerably support disinflation in 2015" said the CBOT and went on as follows:

"Accordingly, inflation is expected to display a notable decline and move towards the 5-percent target in 2015. The Central Bank will continue to monitor developments influencing the inflation outlook and take the necessary measures to retain the achievements on price stability." - Istanbul