Central Bank Governor Erdem Basci will explain why the bank's 2015 inflation rate was 8.81 percent instead of its target rate of 5 percent in a letter to Deputy Prime Minister Mehmet Simsek Hurriyet Daily News reported
This is the fifth time the bank was unable to achieve its target inflation rate under Basci.
The letter is expected to be sent when the Central Bank announces the first inflation report of the year, scheduled for Jan. 26 this year.
Although the Central Bank set its annual inflation target as 5.5 percent in 2011, the rate hit 10.4 percent when Basci was appointed. The inflation rate hit 6.2 percent in 2012, higher than the targeted 5 percent and 7.4 percent in 2013, again higher than the targeted 5 percent. The Central Bank's inflation target was again 5 percent for both 2014 and 2015, but the rate hit 8.2 percent and 8.8 percent, respectively.
Basci presented the issue to the cabinet late Jan. 4. He signaled tighter monetary budgeting will continue until the inflation rate recovers significantly, as written in his 74-page-long presentation. Basci also noted realizing the required structural reforms has the potential to increase the country's growth potentials in a considerable manner. The demand rise in European Union countries have also support the growth rate, he added.
Consumer prices rose 8.8 percent year-on-year in December 2015, reaching way above estimates, data from the Turkish Statistics Institute (TÜİK) showed on Jan. 4. On a 12-month basis, the average rate was 7.67 percent in December 2015. According to TÜİK data, the largest increase was seen in food and non-alcoholic beverages last month, with a 1.24 percent hike as food prices have continued to rise.
Several analysts have criticized the Central Bank for not setting realistic targets in light of sharp fluctuations in foreign exchange rates. The Turkish Lira saw approximately 20 percent of loss in 2015 amid a number of local and global problems. One of these factors was the questions raised about the independence of the Central Bank as several high-level officials severely criticized its rate policy. Such moved triggered rallies in the stock markets and the forex markets over last year.