In Istanbul, Yilmas said there’ll be a partial fall in the rate in March, BUT inflation is expected to “stay high” in the second and third quarters.

The Central Bank has planned to keep interest rates low , “for a long time,” even as inflation accelerated.

Inflation hit a 39-year low of  5-point-1 percent in October.  
     
In a report to investors, Istanbul-based Tera Brokers said it  thinks this is a very challenging situation for the central bank”

“Despite benign core inflation, it will be difficult to keep interest rates at low levels, while inflation hovers at double digits for another seven months.”

Yılmaz’s comments came after the statistics office said Wednesday that inflation accelerated to 10-point-1 percent in February.

That´s the highest rate in 15 months.

Yilmaz said a slowdown in inflation probably won’t occur until the fourth quarter or the first three months of 2011, when it will move in line with targets.

Turkish bonds slumped, pushing yields to their highest this year, and stocks declined after Central Bank Gov. Yılmaz said he expects inflation to “stay high” until the fourth quarter.

Investment bank, Morgan Stanley raised its estimate for inflation at the end of the year to 8-point 1 percent from 7-point-7 percent, saying the rate will probably remain in the 9-10 percent band “for most of this year.