By Tuba Sahin
The Turkish Central Bank (CBRT) will set monetary policy to bring down inflation gradually, according to a report issued Wednesday.
The bank kept [mid-term] inflation target at 5 percent as per the agreement reached with the government.
".....the first objective is to bring down inflation to single digits, and then gradually reduce inflation further to stabilize it around 5 percent," said the bank's Monetary and Exchange Rate Policy for 2019.
Stating that the primary objective is to achieve price stability, the bank said it would continue to safeguard financial stability as a supporting element.
Turkey's annual inflation was 21.62 percent in November, according to the latest data from the TurkStat.
Previously, the Central Bank forecast that the inflation rate would fluctuate between 21.9 percent and 25.1 percent through the end of 2018.
As noted in Turkey's new economic program announced in September, the country's inflation rate target is 20.8 percent this year, 15.9 percent next year, 9.8 percent in 2020, and 6.0 percent in 2021.
The report said that the bank will continue to implement a floating exchange rate regime in 2019.
Underlying that the bank has no nominal or real exchange rate target, the bank said if the exchange rates are at odds with economic fundamentals or excessive volatility poses risk to financial stability, it will not remain indifferent to these developments.
"If the exchange rate movements permanently affect price stability, the CBRT will change its monetary policy stance and give the necessary reaction," it said.
Highlighting the importance of fiscal discipline to fight inflation, the bank said the coordination between the monetary policy and the fiscal policy is crucial with respect to disinflation and macroeconomic rebalancing.
The report added that In 2019, the Monetary Policy Committee (MPC) will hold eight meetings on a pre-announced timetable -- Jan. 11, March 13, April 30, June 19, July 31, Sept. 19, Oct. 31, and Dec. 19.
The bank will keep one-week repo auctions as its main funding instrument, the report stated.