Turkey forecasts inflation at 45-year low

Turkey's central bank said Tuesday that inflation could sink to its lowest in 45 years, pushed down by falling oil prices and the country's tight monetary policy.
Central bank governor Erdem Basci said at a press conference that the inflation rate was forecast to end this year at 5.5 percent, within a range of 4.1 percent and 6.9 percent.
That compares with a previous forecast of 6.1 percent and is sharply down from the rate of 8.7 percent for 2014.
Basci also projected inflation would fall further to five percent next year, saying the bank's tight monetary policy was beginning to take effect.  
"As long as we keep our cautious stance during the rate reduction period, it is possible that we will see the lowest level of inflation in the past 45 years by the end of 2015," he said.
The central bank, which is nominally independent, has been under pressure from President Recep Tayyip Erdogan to bring interest rates down to sustain growth.
A year ago, the bank aggressively raised key rates to avert a major economic crisis following a steep drop in the value of the the lira.
Last week, it lowered the one-week repurchase rate to 7.75 percent from 8.25 percent, for the first time in six months.
But Erdogan is still pressing for further cuts.
Basci said the bank may convene its monetary policy committee on February 4, rather than previously announced February 24, to review interest rates if inflation eases by one percentage point in January.
"Today's announcement is likely to reinforce concerns that the central bank is caving in to government pressure to ease policy," said economist William Jackson at Capital Economics.
"All in all, this is likely to limit the scope for significant policy easing this year," he said.
The Turkish lira was trading down 0.54 percent to 2.36 to the dollar on Tuesday.