Governor Durmus Yilmaz also said on Wednesday it will probably raise the benchmark interest rate this year since food and oil prices made its inflation target unobtainable.
The board said in the summary that the rising trend in food and energy prices and the global financial uncertainties created an upward risk in inflation and this might require a tight fiscal policy for a considerable period but pointed out that prudent monetary policy in itself was not sufficient for attaining price stability.
The board said support from fiscal policy and structural reforms were critical in this respect. "Sound fiscal policy had been one of the main factors in driving inflation to single digits. The role of fiscal policy will continue to be critical on the road to price stability," it said.
The bank has missed the 4 percent inflation target for two years and consumer-price growth will probably be 9.3 percent at year-end, Governor Durmus Yilmaz said on Wednesday. Yilmaz also said the bank expected that inflation would drop to 4.9 percent in 2010 and to 4.0 percent in 2011.
Employers should take the new forecast, and not the inflation target, as a guide for setting prices and wage agreements, Yilmaz warned. The bank previously told companies to treat the target as a benchmark. The previous inflation report in December, forecasted a range of between 4.1 percent and 6.9 percent for end-2008.
March inflation of 9.2 percent exceeded the bank's target, obliging it to issue a public explanation. The lira has fallen about 10 percent against the dollar this year, driving up import costs and adding to pressure from rising oil and food prices.