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Year-end inflation forecast down to 6.2 pct as risk perceptions recover
by kyle Friday, Jul. 27, 2012 at 1:16 AM

Year-end inflation forecast down to 6.2 pct as risk perceptions recover

Year-end inflation forecast down to 6.2 pct as risk perceptions recover ANKARA - 26.07.2012 18:23 Ongoing optimism in Turkish markets, triggered by the latest positive indices, has influenced the risk perceptions regarding foreign investments in the country positively, Turkish Central Bank Governor Erdem Başçı told reporters in Ankara on Thursday. Başçı was sharing the details of the bank's July Survey of Expectations report with the press. The governor said a noticeable recovery in money influx into emerging markets starting from June, combined with better-than-expected market indices, has minimized inflationary pressure in Turkey. “Positive indices, particularly in inflation and current account deficit (CAD), have helped recover risk perceptions of foreign investors regarding Turkey,” he explained. Başçı said global investor risk appetite showed a nascent recovery, following earlier signals that Athens would find an exit line out of turmoil, adding, “However, current news from Spain have weakened this belief.” Markets have fretted over the past few days over fears that Spain, the eurozone's fourth-largest economy, may need a bailout along the lines of Greece, Ireland and Portugal. Başçı pointed out that most central banks worldwide stick to an expansionary monetary policy, adding that Turkey places heavy emphasis on maintaining financial stability. The Central Bank of Turkey earlier cut a number of interest rates used as tools to fund banks and other financial institutions in a move to ease its monetary policy, narrowing what is called the “interest rate corridor” from only its higher end. “This way we managed to get bank loan growth under control while minimizing fluctuations in foreign exchange rates. … This will strengthen our hand in keeping inflation far below two-digit levels,” he stressed. Başçı said that in line with recovering expectations, the central bank has decided to revise the year-end inflation target from the earlier 6.5 percent to 6.2 percent. In what was regarded as a “cautious speech,” Başçı said that his bank expects consumer inflation to be between 5.3 and 7.1 percent -- with a midpoint of 6.2 percent -- by the end of this year. “In our estimation, 6.2 percent is what is most likely to come out in the end,” he opined. Başçı said he is confident that Turkey will see decreasing inflation in the country in the second half of 2012, and that the pace of decline will peak in the last three months of the year. The Turkish Central Bank governor cited a decline in commodity prices, along with reduced influence of foreign exchange rates, for a decline in inflation. Annualized consumer inflation saw a mild rebound to nearly 9 percent in June, according to data from the Turkish Statistics Institute (TurkStat). Inflation in Turkey is dependent on multiple variables, but among them energy prices are generally game-changers. One major factor behind Turkey's double-digit consumer inflation is the rapid expansion of the gross domestic product (GDP) for almost a decade. Londra 2012 açılış seremonisi Initial reactions from the market were mixed. Üzeyir Doğan from Marbaş Menkul Değerler said the latest revision was “no heartwarming news” from the central bank. “Although the revision looks like a positive step at first glance, major factors that helped drop inflation do not stand a chance of fast recovery. … This is not a pleasant scenario,” he stated. According to Garanti Yatırım economist Gizem Öztok Altınsaç, the bank has maintained its cautious stance regarding monetary policies. “We do not expect an interest cut in August and September. Year-end inflation should come to around 6.5 percent, given the seasonal effects,” she concluded. Meanwhile, regarding Economy Minister Zafer Çağlayan's latest criticism that the central bank was “too cautious” on potential price increases for the rest of the year, Başçı said the bank has to maintain its strength with diversified tools. “Developing markets have each developed measures in parallel with their own market dynamics, and we respond to potential problems with separate tools,” he opined. Çağlayan told reporters in Tokyo over the weekend: “The central bank is too cautious now. It needs to take a step to lower the interest rate, and I hope it won't be acting erroneously from now on.” Londra 2012 açılış seremonisi ( Cihan - Today's Zaman ) By jeffyhttp://www.kamudanhaber.com/guncel/spor/londra-2012-acilis-seromonisi-h101657.html

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