CBRT maintains Turkey's inflation forecasts for 2016/17 in its Q3 inflation report

Governor of the Central Bank of the Republic of Turkey (CBRT) Murat Cetinkaya announced the third Inflation Report of the year on Tuesday, where it maintained inflation forecasts for end-2016 at 7.5 percent and end-2017 at 6 percent. According to the report, the inflation rate will fluctuate between 6.6 percent and 8.4 percent through the end of 2016. It noted that the inflation rate will decrease to 6 percent next year from this year's 7.5 percent, will stabilize at 5 percent in 2018.

However, CBT governor Murat Cetinkaya alerted markets to a sharply higher inflation print for July. He expects this because of rising food and tobacco prices; he then expects food prices to moderate. Food inflation has recently become one of the biggest causes of the volatility and increases in yearly inflation, Economy Minister Nihat Zeybekci tweeted on Monday.

"In our view, the sharp drop in food prices in April-May, which kick-started the inflation down-trend, was the aberration. We do not foresee inflation falling to CBT's end-2017 of 6 percent. We forecast core inflation to remain in the vicinity of 8 percent, which means that room for monetary easing is limited. Nevertheless, CBT will continue to ease policy -- the governor made this clear yesterday -- we see USD-TRY at 3.25 by year-end,” said Commerzbank in a report.