Return to single-digit inflation is long way off
Consumer inflation in March reached its highest level in eight years, but we need to gird ourselves for even higher inflation in April and May. There is now little chance that we will see single-digit inflation by the end of the year, and the Central Bank’s estimate for 2017 of 8 percent inflation is completely impossible. It now looks like we will finish the year with inflati- on of 10.5 percent.
In March, the consumer price index (CPI) rose 1.02 percent for an annual increase of 11.29 percent. This was after we hit double digits in February, with CPI at 10.13 percent. The March rate was the highest since October 2008, when inflation stood at 11.99 percent.
Where is actual inflation headed? It appears that the rates will increase in the coming months. What am I basing this on? Using the inflation rates for the period between 2003-2016 as the base, I my forecast shows we will exceed the March rate in the coming period. The reason I started with 2003 is that this is the year the Turkish Statistical Institute switched to a new series to calculate inflation.
Based on my calculations, we will see higher inflation for two more months, but the rate will decrease somewhat and may dip to single digits in July. Inflation will then accelerate, and in November when we will see the highest rate for the year. Then it will slow in December, due to the base effect, since December 2016 saw a high rate.
Still, December inflation will not return to the single digits. My examination using previous years’ trends show that CPI will finish the year at 10.4 percent.