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Turkey raises inflation target, dashing hope for early easing

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Turkey raised its year-end inflation estimate in the newly unveiled three-year economic program, leaving its central bank with less room for a possible monetary easing this year.

Consumer-price inflation will finish 2021 at 16.2 percent, according to the Treasury and Finance Ministry, compared with a July forecast of 14.1 percent by the central bank.

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The move comes as a surprise jump in inflation in the past week pushed the nation’s benchmark interest rate adjusted for price growth into negative territory for the first time since October, dealing a blow to President Recep Tayyip Erdogan’s hopes for an early cut in borrowing costs.

Prices rose for a third month to an annual 19.25 percent in August. The central bank had pledged to keep the benchmark above inflation but has faced calls from Erdogan to deliver a rate cut as early as this month.

Other highlights in the Treasury and Finance Ministry’s Medium Term Program include:

A forecast for inflation slowing to 9.8 percent in 2022 and 8 percent in 2023

GDP growth seen at 9 percent this year and 5 percent next year while current-account deficit to GDP ratio is expected to be at 2.6 percent in 2021 and 2.2 percent in 2022

Government sees budget gap to GDP ratio at 3.5 percent in 2021 and 2022, 3.2 percent in 2023

Unemployment rate is seen at 12.6 percent this year and it’s expected to decline to 12 percent next year

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