Ordinary inflation becomes critical
inflation reached 3.18%, and annual inflation hit MONTHLY
69.80% in April. Thus, we have faced an April inflation to be discussed more than in previous months while expecting it to lose its importance gradually.
Although we knew that annual inflation peaks in May, there was also hope that the monthly trend wouldn’t be too bad.
The Central Bank, however, successively signals that the monthly trend is not good at all. However, it has stuck with the thesis that the impacts of monetary tightening will be seen later. It chose to wait or had to do so.
Considering some evaluations, the Central Bank is actually uncomfortable with the situation.
▶ The bank has emphasized instantly in the PPK statement that rates cannot be lowered in the short term. It gives a message that we should not think about the rate cut for a long time.
▶ The bank underlines to be ready for new rate hikes at any moment. “Monetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen,” it said in the PPK statement. This expression remained unfulfilled, at least in the last month. “In March, despite an ongoing decline, the underlying trend of monthly inflation was higher than expected,” the statement read. The monthly inflation rose from 3.16% in March to 3.18% in April. Will the bank stick with the thesis that the impacts of the monetary tightening will be seen later now? It is in a tight corner!
▶ It’s very likely that the bank has seen how monthly inflation proceeds for a few months. The bank raised the policy rate by 5 points in March before the elections. That hike was mainly to hold the rapid FX rate increase instead of the fight against inflation. However, there was also the aspect of fighting against inflation. The FX demand was broken in April. However, the bank kept the policy rate steady, although it saw the danger in inflation and stated that danger. Or, more precisely, it wasn’t allowed to do so.
▶ The Istanbul Wage Earners Cost of Living Index (WECLI), which indicates the movement of retail prices in Istanbul, increased by 4.89% in April. The annual WECLI hike was 78.81% last month. The WECLI and TurkStat’s inflation rate cannot be precisely the same. The two data are alike in many ways. Yet, the WECLI is a pioneering indicator. Close rates are expected in some groups, especially in the food group.