Inflation and the High Cost of Living

Inflation figures will be announced this morning. Before they are released, I thought I could share ana analysis on the cost of living. As a citizen who pays rent, tuition fees, spends money on food and groceries, pays back loans, I know that the CPI does not reflect my living experience.

However, as an economist, I have to analyse the official figures. This is the case although people’s confidence in the numbers is decreasing, and they have doubts about the reference point. I personally experience that wage increases are not even serve as a dressing on the wound while prices go higher and higher every month.

I often say that we cannot combat inflation by increasing wages alone. However, these words of mine are sometimes misunderstood, and cause some people to react in a rather negative way. What I am saying is quite simple: If we do not tackle the root causes of inflation and only keep increasing the wages as a countermeasure, it will never be possible to reduce the high costs of living.

Türk-İş’s latest “Starvation and Poverty Line Survey” confirms what I have said. According to the July results of the survey, a family of four has to spend TRY 6,840, which is the hunger threshold, per month in order to have a healthy, balanced, and adequate diet. The total amount of money that needs to be spend on food and other essential monthly needs such as clothing, rent, transportation, education, healthcare has increased to TRY 22 thousand 279, also known as the “poverty line”.

“Single or Married…Doesn’t Matter.”

The cost of living for a single employee has increased to TRY 8 thousand 929 per month. According to the survey results, the minimum expenditure to buy food for a family of four living in Ankara grew by 7.01% compared to the previous month. The rate of increase has been 128.44% as of the last twelve months, and the rate of change for the last seven months has been 66.90%. I don’t think that increases in other cities have been majorly different than those in Ankara. They could even be more.

The government will not be able to reduce inflation without cooling the economy down and curbing the consumption. However, trying to provoke the real sector by saying “Do not hike prices! Increase supply instead!” before the elections will not yield a good results unless the necessary funds are provided. The Istanbul Chamber of Commerce and Central Bank meeting shows us that those in charge of monetary policies are gradually moving away from the real sector.

The fact that people responsible for managing Turkey’s economy make a general interpretation of certain developments does not lead the country in the right direction. I think implementing the necessary preventive measures would be the reasonable thing to do, instead of threatening to divulge the names of who bought foreign currency with cheap funds.

Better yet why not divulge? However, if such information is considered private or sensitive so it is illegal to reveal it, it might be better to avoid making statements like that.