Turkish central bank vows firm stance against inflation

ISTANBUL - Turkey's central bank chief on Tuesday pledged to maintain a firm stance against inflation, currently close to 20 percent, and sought to reassure the markets over the fall of its foreign currency reserves.

Observers raised concerns last week that the central bank had withdrawn its commitment that it was ready to tighten its monetary policy if necessary to control inflation.

But central bank governor Murat Cetinkaya promised Tuesday to take stringent measures if the situation required during a presentation of the bank's quarterly inflation report.

"If the inflation curve deviates from our forecasts, then we want it to come back on the right track," he said in Istanbul, adding that the central bank would use "all the tools at its disposal" to achieve its targets.

Markets fear that the central bank will lower its main policy interest rate, currently at 24 percent. President Recep Tayyip Erdogan has been putting pressure on the nominally independent central bank to cut interest rates in order to promote growth, even though this risks stoking inflation.

It struck a 15-year peak in October at 25.24 percent before falling below 20 percent in February. Food prices have been hit particularly hard.

Cetinkaya indicated that the central bank forecasts inflation will fall under 15 percent by the end of the year and hit 8.2 percent in 2020 -- which matches the forecasts made in the previous quarterly inflation report.

As well as high inflation, the Turkish economy is going through a difficult period with its first recession in a decade and unemployment hitting the highest level since 2010 in December at 13.5 percent.

Meanwhile the Turkish lira has been sliding against foreign currencies. The currency has lost 11 percent of its value against the US dollar since the start of 2019. The lira lost nearly 30 percent of its value against the greenback last year.

For weeks, markets were worried over the volatility of the central bank's foreign reserves -- which inexplicably plunged last month and alarmed investors.

But Cetinkaya sought to reassure by saying that the recent fluctuations were "neither exceptional nor abnormal", adding that the bank intends to strengthen its reserves.