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    The figures are clear enough

    Fatih Özatay, PhD04 March 2014 - Okunma Sayısı: 1594

    Inflation is on the rise. Annual CPI was at 7.8 percent in January and increased to 7.9 percent in February.

    Inflation figures for February validate the expectation that inflation is on the rise. Annual CPI was at 7.8 percent in January and increased to 7.9 percent in February. The critical increase was in headline inflation, which determines the CPI dynamics. The I indicator increased to 8.4 percent compared to 7.6 percent in January on year-on-year basis. Let me remind you that the average headline inflation remained significantly below the CPI average previously.

    After January inflation figures were released, I shared with you three-month inflation estimates for 2014 under different exchange rate, GDP growth, and crude oil price assumptions. According to this, I estimated that annual CPI average in 2014 will be in the 8-9 percent interval, the chief determinant being the exchange rate dynamics. There is no need for an update for now. Soon ago, the Federal Reserve (FED) released a report which assessed the potential impacts of its current monetary policy on 15 countries.

    The report ranked countries from the most to least fragile in the light of six indicators and identified Turkey as the most fragile one on the list. Inflation was one of these six indicators. The table below shows the average CPI in these 15 countries over the last two years. The countries are ranked in terms of 2013 inflation in descending order. India has the highest 2013 CPI and is followed by Turkey. Moreover, annual CPI inflation in Turkey was almost two times that of the group average in 2013 and more than two times that in 2012.

    Unfortunately, Turkey has not paid much attention to inflation lately except the last few months. The Central Bank endeavored on indicators other than inflation meanwhile, such as credit growth rate and the exchange rate among others. Concerning inflation, it assessed that despite the diversion from the targets, the inflation was in line with medium-term outlook.


    Some of you might appreciate and acknowledge the new monetary policy in play since the late 2010. I have explained dozens of times why I disagree; and the table above summarizes my point exactly. There is no need for further interpretation, especially when we consider the potential course of the CPI.


    This commentary was published in Radikal daily on 04.03.2014