Başçı mentioned only some of the emerging economies have high current account deficits (CAD) and these countries are starved of investments. He said, “Turkey has strict budget and monetary discipline, in addition to a strong banking sector,” adding that the selective effect of the European sovereign debt crises is predicted to differentiate between developed and emerging countries, which might lead to an increase in investments for emerging economies.
Announcing the first inflation report of 2012, Başçı forecasted the inflation rate to be approximately 6.5 percent, with the lowest predictions for year-end inflation to be 5.1 percent and highest to be 7.9 percent. He stated, “Inflation will become stable at 5 percent in the medium term,” adding that the central bank will maintain its firm stance in order to keep inflation consistent with medium term economic plans.
Başçı expressed that the uncertainty of petroleum prices poses a risk for inflation and said, “Even though the global crisis puts pressure on commodity prices, the evident petroleum supply problems will cause a rise in prices in the future.” He added that if such problems arise, the central bank will not respond to temporary price movements and will not allow predictions to change. He also said petroleum prices are expected to be $110 a barrel for 2012 and $105 for 2013.
The governor noted strict monetary policy will be maintained for a while and said annual lending growth is forecasted to be 15 percent, while the Turkish lira will continue its moderate appreciation. He explained that while developing monetary policies, the central bank will take precautionary measures and closely monitor developments in fiscal policies, as well as focusing on maintaining the stability of financing and prices. The effect of these measures on inflation will also be taken into account. “In the event that fiscal policies diverge from expectations, we will update our monetary policy,” he added.
Başçı underlined that strengthening structural reforms would help cement monetary discipline and lower the account deficit, while supporting financial stability. Highlighting the predicted decrease in inflation beginning with the second quarter, he said this will be the result of a diminishing influence of price movements on inflation. He noted that bringing inflation down to 5 percent from 10.45 percent in 10 months might lead to unwanted economic results and it is better to extend the target date to one and a half years, adding, “Inflation is expected to hit 5 percent by the middle of 2013.” Başçı also highlighted that new data might lead to a change in the position on monetary policy.
Noting the continuing uncertainty in the global economy, Başçı said it is important to have a flexible attitude towards monetary policy. He stated, “The uncertainty causes a downward trend in global growth and risk appetite but at the same time, if steps are taken in a faster and more decisive manner than predicted, a positive perception for the global economy will begin.”
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Source : todayszaman.com
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