As expected, inflation rates by TurkStat turned out to be quite below those released by the Istanbul Chamber of Commerce, once again showing us that the connection between the official inflation and the everyday inflation that directly affects citizens’ quality of life is completely broken.
The data confirming this fact is that the core inflation is higher than the CPI, which is announced as 43% against a 45% core inflation rate. Concerning this development, I made the following comment on social media:
“Core inflation has surpassed the CPI. Now, the prices of the goods and services are much higher regardless of the season. I wonder the price of what item that fast due to seasonal reasons.”
How can one explain that the footwear prices have increased less than 15% annually according to the CPI, while apparel prices in Istanbul increased by 30% in April alone?
The cost of living still remains between 70% to 100% and the CPI figures are not only unconvincing but also unable to offer the Central Bank the mobility to take an action in May. We might see a final move by the CBRT if the election goes to the second round.
If the connection between prices, exchange rates, interest rates, wages and unearned income is broken, if there is more than one price formation in the same market, this would make investors unwilling to take a position and even drive them to get out of that market. Indeed, several international financial institutions have announced that they would not be taking a TRY position before the elections, while others announced that they would not be submitting quotations as of this week. Practices such as free market rate, bank rate, special rates for paying cash to buy currency etc. diminishes foreign investors’ trust and confidence in Turkish markets.
As the government has set its sights on winning the elections again, I think the economy officials do not make long-term plans either.