Inflation rate discrepancies

Dunya Executive - - COMMENTARY -

This year’s CPI increase was estimated at 20.8 percent in the new economy program, which was announced on September 20, forty days ago. The conditions have changed in the meantime, and apparently the estimates as well. The Central Bank released the last inflation report of the year last week and announced that the CPI was estimated at 23.5 percent for the end of the year. Consumer prices increased by 19.37 percent in the first nine months. Thus, the Central Bank predicts that the total increase in CPI in the last three months will remain at 3.46 percent. Let as recall that the average increase in CPI in the last quarter over the last fifteen years is 3.24 percent.

2019 and 2020 are d fferent as well

A lot may change in forty days. I agree that estimates may need to be revised and therefore the Central Bank may estimate a rate higher than the rate in the new economy program. But what can we say about the fact that inflation rates for 2019 and 2020 also show discrepancies? In addition, the Central Bank’s inflation forecast for this year is higher than the new economy program, but the forecast for the coming years will remain below the rates in the program.

This year, the forecast is 20.8 percent in the new economy program; the Central Bank estimate is 23.5 percent. For 2019, the ratio in the NEP is 15.9 percent while the Central Bank’s estimate is 15.2 percent. For 2020, the rate in the NEP is 9.8 percent and the Central Bank has estimated it at 9.3 percent. “We have based our estimates on a framework in which the tight monetary policy stance will be maintained for a long period of time,” the Central Bank said in its report. But if the the NEP estimates higher inflation rates for 2019 and 2020, does the economic management team consider a tight stance to the same extent as the Central Bank? And if not, are we going to have another conflict over interest rates?

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