TFinance Minister Nureddin Nebati told economists he expects the inflation rate to peak at about 40 percent in the months ahead and not to surpass 50 percent this year, according to people who attended.
According to Bloomberg, Nebati provided his most detailed outlook yet for consumer prices in 2022 during a meeting with 60 economists and analysts on Saturday in Istanbul.
The minister said the inflation rate may not fall below 30 perent until the end of the year. The Turkish Finance Ministry declined to comment.
Turkey’s inflation rate hit 36.1 percent in December, the highest since the beginning of President Recep Tayyip Erdogan’s 19-year rule. Inflation expectations for the next 12 months jumped to 25.37 percent from 21.39 percent.
The jump in prices was fueled by Turkey’s central bank cutting its benchmark rate by 500 basis points in four consecutive meetings, before announcing a pause to its easing cycle on Thursday.
Nebati expects the measures could result in $10 billion in corporate assets being converted to lira, helping to support the currency.
In the meantime, Turkey’s banking regulator has advised commercial lenders not to distribute dividends from profits in 2021, when a currency crash eroded banks’ cash buffers, people with direct knowledge of the matter said.
The regulator, known as BDDK, passed its recommendation to the lenders via Turkey’s banking association, but has yet to send a formal, written notice banning dividend payments, according to the people, who asked not to be named due to the sensitivity of the matter.
Lenders were permitted to pay as much as 10 percent of their net income as dividends last year due to successful risk management during the pandemic.
Despite quickening inflation, the central bank has started an aggressive cycle of rate cuts, which eroded confidence in the lira and led the currency to be the worst performer in emerging markets last year with more than 40 percent depreciation against the dollar.
Turkey plans to inject 51.5 billion liras ($3.8 billion) into state banks in order to minimize the effect of the weak lira on state banks.
Turkey may spend $3.8 Billion to boost state banks’ capital.
Turkish lira banknotes are seen in this picture illustration in Istanbul, Turkey August 14, 2018. REUTERS/Murad Sezer/Illustration