Don’t say, “This is not our inflation” now!” Well, it’s not. It is the high cost of living you’re complaining about. I, on the other hand, am talking about inflation figures released by the TURKSTAT. So, all I ask from you is just a little patience.
First of all, let me remind you that Istanbul Chamber of Commerce’s cost of living index and CPI figures have been following a common projection for a while now, except for the fact that they have become differentiated since the beginning of this year. I must admit that I got curious when CPI inflation exceeded the 1% target this weekend. I wondered whether differentiation would continue. But, it did not. Istanbul Chamber of Commerce cost of living index and CPI inflation turned out to be quite similar this time.
I have also felt the need to establish some sort of correlation between the 7.4% inflation target announced by the CBRT last week and the recently released numbers. I have come to the following conclusion when I added up all CPI data from June to April, and subtracted from the 7.4% inflation target: We can’t possibly meet our inflation target if monthly average inflation exceeds 0.53% until the year-end. We even need monthly negative inflation in July and August just like we had in the past years.
“Things will get tough… Especially considering the rise in foreign exchange rates…”
Turkey’s inflation target was around 8.2% in the New Year, which was already a hard target to achieve. But for some reason, CBRT revised it to a more difficult one, causing people to believe that the fact that CBRT pushed back its inflation target was mostly about trying to come up with a reason for cutting interest rates. Especially when now USD/TRY exchange rate exceeded 7.00, such an action caused some raised investor eyebrows.
As foreign funding negotiations seem likely to achieve its intended target, expectations for less FX rate pressure on inflation are becoming stronger every day. However, the fact that even the most alert investors are saying it has not yet been determined that Turkey will receive foreign funding keep disturbing the markets.
In short, I am not satisfied with the latest inflation data, not to mention the sharp rises in food prices. From now on, markets would start keeping a closer watch of inflation figures, consequently causing CBRT to get stressed out about its May interest rate decision.
