Turkish CB says inflation rate must be met, not continually adjusted

"The central bank should change the inflation target only once, not twice or three times," he said in a speech at a conference in Istanbul. "It is incumbent upon us once we revised the targets, we don't have the luxury not to achieve them," he said.  Â

 

Earlier this month the bank almost doubled its inflation target for next year to 7.5 percent from 4 percent and also set new targets for the following two years.

 

"The inflation targeting regime is one of the monetary policy regimes and all regimes have their own rules and frameworks. Our main policy document published in December 2005 describes the framework of our inflation-targeting regime," Yilmaz said.

 

"The 24th paragraph of that document states that: a pre-announced inflation target shall only be changed in the event that very sharp and long-term deviations from the target are expected or medium-term targets no longer make sense due to factors beyond the control of monetary policy. At this point, a new target will be set with the government with respect to the law," Yilmaz stressed.

 

"The paragraph that I have just read completely defines the recent conditions and explains why we revised the inflation targets for 2009 and 2010," he said.

 

The central bank sees food and commodity prices remaining elevated for the foreseeable future and inflation as a challenge for Turkey. The bank also identifies Turkey as a net commodity importer in contrast to many other developing countries.

 

"Under these conditions, a revision in inflation target has become a technical necessity," Yilmaz added.

 

Yilmaz also said they were supporting the efforts to develop Istanbul as a financial magnet in the region, when asked his thoughts on the moving of the central bank from Turkey's capital Ankrara to Istanbul. Â       

 

"If the current law continues to be sufficient we will also stay in Ankara. But we can move to Istanbul if the law is amended," he said.