* Market seen welcoming long-stated move to single policy rate
* Central bank lifts 2018 inflation forecast to 8.4 pct
* Says will ‘decisively’ stick to tight policy (Adds analyst comment, recasts)
By Nevzat Devranoglu and Ece Toksabay
ISTANBUL, April 30 (Reuters) - Turkey’s central bank on Monday lifted its 2018 inflation forecast to 8.4 percent and said it was moving closer to officially using a single rate to set policy - a switch analysts have said is long overdue.
For years the central bank relied on a complex system of multiple rates to set borrowing costs, which economists said made monetary policy less predictable.
While the bank has largely stopped using multiple rates in the last year, it is now relying on a single rate - albeit one that is not one of its official policy tools.
Governor Murat Cetinkaya has repeatedly said that moving to a single policy rate is a priority, but the process has not been swift.
“We are close to completing our simplification,” Cetinkaya told a briefing for the bank’s quarterly inflation report. “The final step will be funding through a single rate, and we are close to making that decision.”
Politics have helped to cloud the policy outlook. President Tayyip Erdogan, a self-described “enemy of interest rates”, has repeatedly called for lower borrowing costs to boost the economy.
The central bank’s unwillingness to tighten via its benchmark one-week repo rate - it has been using its late liquidity window - has only strengthened the perception that it is avoiding outright increases because of political pressure.
“For a long time, markets have been waiting for the simplification of monetary policy,” said Inan Demir, senior emerging markets economist at Nomura International.
“Expectations that the simplification will take place after the June 7 meeting have surely strengthened. If we don’t see the simplification step, we might face pressure on the lira.”
Turkey’s central bank is due to have its next policy-setting meeting on June 7.
The lira has fallen some 7 percent this year, hitting a series of record lows against both the dollar and the euro, and making it one of the world’s worst-performing emerging market currencies.
The central bank lifted its year-end inflation forecast to 8.4 percent from 7.9 percent, citing expectations for higher prices of oil and imports.
For 2019, it stuck to its target of 6.5 percent, while maintaining a 5 percent outlook for the medium term.
Double-digit inflation, which has been stoked by chronic weakness in the lira, remains one of the most pressing problems for the economy. It was at 10.23 percent in March.
“The tight stance in monetary policy will be maintained decisively until the inflation outlook displays a significant improvement and consistent with targets,” Cetinkaya said.
The central bank last week lifted its top interest rate by a more-than-expected 75 basis points to 13.5 percent, although some economists have said that a greater increase is needed to put a floor under the lira. (Additional reporting by Ali Kucukgocmen; Writing by David Dolan Editing by Dominic Evans and Gareth Jones)