Turkish Central Banker Under Spotlight to Prove He’s a Hawk


Turkey’s central bank chief will unveil his inflation projections on Thursday, giving him a chance to ease fears that he will prematurely relax rates like his predecessors.

Even as inflationary pressures mount, economists say Governor Naci Agbal may stick with his 2021 inflation forecast of 9.4% after declaring it an “interim target” that must be reached.

“Higher commodity prices and minimum wages warrant an upward revision for end-2021 inflation forecast,” said Hakan Kara, a former chief economist at the central bank. “If the central bank does not change the forecast, this would signal a tighter monetary stance, in line with the recent hawkish monetary policy committee communication.”

Turkish Central Banker Under Spotlight to Prove He’s a Hawk

JPMorgan Chase & Co.analyst Yarkin Cebeci said he doesn’t expect a significant revision of the outlook. “Although my forecast is 10.5%, I see a decent chance that inflation falls to single digits at the end of the year,” he said.

At the end of December, inflation was running almost triple the official 5% target.

Survey of ExpectationsCBRT Projection (Oct. Inflation Report)Official Target
Year-end 202111.15%9.4%5%
Year-end 20229.14%*5%5%
* 5% is the central bank’s official target. A specific projection for end of 2022 will be provided at Thursday’s inflation report.

Last week, the central bank left its benchmark interest rate at 17% at the first monetary policy meeting of the year, pledging to keep it elevated for an “extended” period and deliver additional tightening if needed. The pause followed a cumulative increase of 675 basis points since Agbal took over, bringing inflation-adjusted borrowing costs well above yields offered by emerging-market peers.

In December, the governor said the central bank’s year-end inflation estimate of 9.4%, set by his predecessor, is “an interim target that must be followed and reached.” The Monetary Policy Committee is next scheduled to discuss borrowing costs on Feb. 18.

©2021 Bloomberg L.P.

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