Runaway inflation

• Back in September- october2018, D -PPI ran at 46% whereas CPI hit 25.5%. There was accumulated inflation, and I suggested that CPI could run up to 30-35%.

• That didn’t happen, at least if we consider official figures. Moreover, the USD/TRY exchange rate stood at 5.97 on october 1, 2018 whereas it is now at 8.67. Given this I ask the following questions.

• Did CPI jump in 2019 and in 2020? An independent inflation measurement group claims the CPI is around 37% currently. If you ask the people at large, irrespective of profession and education, the perception is that it is at least 25-30%.

• So maybe the accumulated cost pressures of the 2018 exchange rate shock did manifest themselves in the CPI also, but we don’t know this for sure.

• If so, then what to make of the current scissors between CPI and D-PPI, which respectively stand at 17.5% and 43%, similar to Autumn 2018? Where exactly could CPI go up to even if it rarely meets D -PPI at the D -PPI peak?

• Furthermore, metals display 100% annual inflation. Refinery showcases 123%. oil and natural gas hit 181% annually. D-PPI was only 6.17% in June 2020. The acceleration of cost inflation is eye-catching indeed.

• Moreover, new administered price hikes in natural gas and electricity aren’t yet in the data. The new wave of price hikes could add at least 1.2-1.5% to the current CPI. So, a 20-22% CPI peak is in the cards, officially speaking. But just how high the index would have hit in reality will again be unclear.

• We used to call 20-25% CPI moderate inflation, and moderate inflation is notorious for either returning to ‘garden variety’ inflation or rising further and becoming runaway inflation. Maybe it already has.