(Recasts, adds analyst comment, background)
By Ece Toksabay and David Dolan
ISTANBUL, Nov 1 (Reuters) - Turkey’s central bank raised its year-end inflation forecast to 9.8 percent on Wednesday from 8.7 percent previously, and warned that volatility in the lira exchange rate and a rising oil price may push inflation higher in the short term.
After recovering from a downturn following a failed coup in July 2016, Turkey has posted impressive growth, with the economy expanding 5.1 percent in the last quarter.
But inflation remains one of its most pressing problems.
Core inflation, which excludes the price of food and other volatile products, surged to a 13-year high last month.
President Tayyip Erdogan, who describes himself as an “enemy” of interest rates, has blamed the high cost of credit for fuelling price growth - a stance at odds with orthodox economics..
His comments have increased concerns among investors that the central bank’s policy is less than independent.
“(The) tight stance in monetary policy will be maintained decisively until the inflation outlook displays a significant improvement and becomes consistent with the targets,” Central Bank Governor Murat Cetinkaya told a presentation in Istanbul.
The bank also raised its mid-point forecast for end-2018 inflation to 7 percent from 6.4 percent in its previous report.
Cetinkaya said October inflation may be higher than expected and November’s figure would also have an “upside risk”, although inflation would start falling in December and pressures would ease in 2018.
The lira weakened after the central bank comments to 3.8180 at 0903 GMT, compared with around 3.8 before the presentation started.
“The bank keeps on saying that the current monetary policy is already tight,” said Ozgur Altug, chief economist at BGC Partners, in a note to clients.
“So we do not expect an action from the (central bank) in the short term.”
The bank said it aimed to bring inflation down gradually to its target of 5 percent. (Reporting by Ece Toksabay, David Dolan and Ezgi Erkoyun; Writing by Daren Butler; Editing by Dominic Evans and Hugh Lawson)