(Bloomberg) -- Turkey still has some way to go when it comes to reining in price expectations and monthly inflation, the central bank’s two main metrics for shaping policy, Governor Fatih Karahan said on Thursday.
Monthly inflation needs to slow “permanently and significantly” while inflation expectations need to converge with the central bank’s outlook, Karahan told lawmakers in Ankara on Thursday. “We assess that there’s some distance to go in both criteria. Therefore, we will continue to preserve a tight monetary policy.”
Household and businesses’ inflation expectations are more elevated than officials would like. The central bank has described it as something that could hinder its efforts to bring down the inflation rate.
Data for September, announced before Karahan spoke, showed that year-on-year inflation slowed to 49.4% from 52% in August. That was a smaller drop than analysts surveyed by Bloomberg had expected. Monthly inflation edged up to 2.97%.
Taking questions from the lawmakers, Karahan said monthly price growth was higher than the central bank’s own expectations. The bank gives “clear guidance” in its statements regarding its stance and takes decisions based on the assessment “quite a lot of data,” he said.
Some economists are now saying Turkey will have to delay interest-rate cuts until next year. The central bank has kept its main rate at 50% since March, but softened its stance last month.
Seasonally-adjusted inflation, cited by Karahan, will be published for the first time on Friday. “We will preserve our tight monetary policy stance until price stability is achieved,” he said.
(Updates with more quotes from Karahan starting in fifth paragraph.)
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