Turkish Central Bank Governor Fatih Karahan speaks during a press conference in Istanbul, Turkey, February 7, 2025. REUTERS/Dilara Senkaya/ File Photo

By Ezgi Erkoyun and Can Sezer

ISTANBUL (Reuters) -Turkey's central bank is aiming to cut inflation to 16% by the end of next year and 9% by end-2027, it said on Thursday, separating the targets from its inflation forecast ranges in a new strategy aimed at boosting transparency and confidence.

Presenting the central bank's quarterly inflation report, Governor Fatih Karahan said the bank was keeping its inflation target for this year at 24%, even though it is forecasting inflation of between 25% and 29%. He said this was while the bank switched to the new system.

Previously, the bank presented the target as the midpoint of the forecast range. Separating the goal and the range could give markets a clearer indication of where policy might be heading.

"We have decided to change the framework for presenting medium-term forecasts," Karahan said. "We will present 'interim targets' that will not be changed unless extraordinary circumstances occur between report periods."

"The 'year-end interim targets' will serve as a commitment and anchor," he said.

"We will maintain our tight monetary policy stance to achieve our interim targets. We will determine the steps to be taken in a way that will ensure the tightness required to reach the targets," he added.

Last month, Turkey's central bank cut interest rates by 300 basis points to 43%, resuming an easing cycle that had been disrupted by political turmoil earlier this year, as markets have since calmed and disinflation continued.

Annual consumer price inflation fell to 33.52% in July, sustaining a downward trend after peaking at 75% in May 2024.

Karahan said inflation forecasts would continue to be announced in the quarterly inflation reports.

Daglar Ozkan, an economist at Is Yatirim, said separating the targets and forecasts made central bank communication more realistic.

"This will allow us to better observe and assess deviations from inflation targets. I anticipate year-end inflation slightly above the forecast range of 25-29%" Ozkan added.

The lira was little changed at 40.79 to the dollar after the news.

Before last month's rate cut, the central bank had hiked its policy rate in April to 46% from 42.5%, reversing an easing cycle that had begun in December. That followed market volatility over the arrest in March of Istanbul Mayor Ekrem Imamoglu, who is President Tayyip Erdogan's main rival.

(Reporting by Ezgi Erkoyun and Can Sezer. Writing by Daren Butler. Editing by Christina Fincher and Mark Potter)