Before TurkStat announced the inflation rates yesterday, Istanbul Chamber of Commerce’s Cost of Living Index was released. The index showed us that the cost of living increased by 4.44% in Istanbul in February, and the annual increase in Retail Prices was around 55%. This is the highest rate Istanbul has experienced in the last 20 years. The Wholesale Index on the other hand has gone up by nearly 59%.
Although Istanbul Chamber of Commerce Indices seemed like they indicated a slowdown in Wholesale Prices, I do not think that the PPI will not be as hopeful. Indeed, it was not, monthly PPI exceeded 7%, reaching 105% on an annualized basis. As for the consumer inflation, our worst fears came true.
“Modern World’s Highest Inflation Rate…”
In January, Istanbul Chamber of Commerce’s Cost of Living Index turned out to be as 13.78% and CPI as 11.1%. Accordingly, if the CPI was announced around 4% in February, the Consumer Prices would have risen above 50% annually. I did not hope for a lower rate as I knew that the “base effect” would continue to affect our economy negatively for a few more months.
Unfortunately, the CPI turned out to be 4.81% in February, exceeding expectations and hitting 54% on an annual basis. The largest price increases were for agricultural products: more than 50% per month. The slightest price increases were for clothing items, mostly in the single digits.
My comment is this: Apart from the hyperinflationary economies, Turkey is the economy with the highest inflation rate among the countries of the modern world after Argentina. Turkey is also the economy with the biggest difference between its policy rate and inflation rate. After the Fed’s decision on 16 March, since there will be no possibility of cutting interest rates, perhaps the CBRT will also join the gradual rate hike movement. According to experts, this movement may begin in a two-month period.
Thus, policy rates will rise, while market rates will begin to fall. There doesn’t seem to be any other solution anyway.
