What Do the CPI Figures Tell Us?
The CPI data just released after the CBRT Chair has revised expectations two months before the end of the year seemed a bit interesting to me. The CPI must roughly increase by another 10 points in order for the inflation rate, which has been remaining at 55% since the beginning of the year, to reach 65% by the year-end.
If the rate stays below this percentage, I wonder whether the central bank will accept congratulations because inflation will have finished the year below expectations.
The only thing I know is that the forecasts announced by the Central Bank should be at least be around the target, if not spot-on. Unless they change something, their method will not be much different than the process that the previous CBRT officials called “heterodox”, which, to me, was merely an unorthodox method. Foreign currency reserves were sold through the back door then, and they are being sold now. The targets were continuously revised then, and they are being revised now. The Chair of the Central Bank gives the same messages that the previous administration used to give, when she says, “I have billions of dollars’ worth deals on my desk, waiting to be negotiated.” Even if it were true, when it does not become a reality, the result is a decline in trust.
It is a fact that the price of restaurants and hotels, communication services, tuition fees and all other goods and services have increased more than the CPI in a year, but what the CBRT and the government do about it concerns me more. As Minister Şimşek said “rational economic policies must be urgently adopted” Instead, the CBRT prefers an almost hybrid practice. People talk about how they were successfully killed the demand for the KKM deposit scheme, but they do not talk about the reserves sold to do that and the rising TRY interest rates. First they say, “We are very close to the real interest rate”, but then inflation rates go up again, moving the economy further away from the real interest rate. They say they are realistic yet they set an impossible inflation target for 2024. The Central Bank, which expects that the CPI will exceed 70% in May next year, keeps its year-end target under 40%, and it bases this on mathematics. Just like the presidents of football clubs who say, “Mathematically, we still have a chance to be the champion.”
When people without much knowledge about the dynamics of the national economy and people’s purchasing behaviour are appointed to critical positions, it is often “too much talk, less action”. Trustworthy officials are not those who speak impressively, but those who do their job right. So, I’m afraid that people’s patience might run out very soon while waiting for the CBRT to take the right action.
