Inflation Ends 2015 At Almost 9%

TURKEY - Report 04 Jan 2016 by Murat Ucer

Consumer prices rose by a more than expected 0.2% in December (consensus, no change), taking the 12-month rate sharply higher to 8.8%, from 8.1% in November. CPI-inflation hence ended the year markedly above target (5%) for yet another year (Graph 1), as well as above both the first (5.5%) and the last (7.9%) estimates (both mid-points) of the CBRT. The Bank will now have to write a letter to the government, having missed the target by over two percentage points, explaining the reasons for the miss. In general, these letters do not have much significance -- partly because by now there are so many of them (available in Turkish only) -- but this one will be quite interesting to see whether the Bank still sees inflation as primarily a “cyclical” problem (that is whether it still is in denial), or acknowledges, at least partially, that something has gone “permanently” wrong about Turkey’s inflation dynamics.

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