ISTANBUL: Despite fall in world commodity prices, primarily oil, inflation rates cannot be brought down to the desired level in Turkey. Central Bank Governor Erdem Başçı announced the Inflation report, saying that they had expected a fall in inflation in October but it happened the otherwise.
In October, despite the market expectation of 1.78 percent, the consumer price index (CPI) went up to 1.90 percent. With this figure, last year’s inflation rate also went up from 8.86 percent to 8.96 percent compared to the previous month. The annual increase in producer prices has reached double digits with 10.10 percent.
Başçı said inflation had now entered a downward trend, but a steeper fall looks difficult until the end of the year.
The reason is that CPI increases were very low in November and December last year, so markets do not expect a decrease in annual inflation until the end of this year.
The Central Bank, with the latest revision it made last week, changed the dot target in the inflation band to 8.9 percent and the top limit of the corridor to 9.4 percent. Thus, even though one week has passed since this revision, we can say there is no possibility left for the dot target to be reached.
The increase in food prices that plays a significant role in the rise of inflation went down in October below the average of past periods, but again it has a high course.
On the other hand, the fall in world oil prices has started to make positive contributions to energy prices and inflation. While fuel oil prices are expected to fall, this situation will also positively affect inflation next month. But despite this, it is separately noteworthy that inflation is on the rise.
The ISIL factor
Even though it has a low course, in parallel with the setting of the FED’s interest rate increase, possible increases in foreign exchange rates may curb this fall. Expectations that the dollar exchange rate will rise to 2.5 Turkish Liras can be considered bad news for inflation.
