We have by no means seen this in our historical past, however…

İbrahim Turhan, Former Central Financial institution (MB) Vice President, in his assertion on the Central Financial institution’s year-end inflation forecast, “It’s true that end-of-year inflation will decline to round 70 p.c by 2022. I believe we will see double-digit month-to-month inflation in March-April. If credit score enlargement is as robust as I believe, then Turkey might need to expertise a small instance of hyperinflation that it has by no means seen in its historical past.” used the phrases.

Answering the questions of Cihat Arpacik from Unbiased Turkish, Turhan’s statements are as follows;


“In line with TURKSTAT knowledge, inflation was 83 p.c, and the Central Financial institution lately predicted that year-end inflation could be 65.2 p.c. There are feedback that inflation might be proven decrease as a result of base impact, however will it drop by 20 factors in two months?

In December final 12 months, there was a month-to-month inflation of near 14 p.c. Month-to-month inflation will probably be round 5 p.c this 12 months. Due to this fact, 14 might be subtracted from the annual inflation account and 5 might be entered as a substitute. In January, inflation was 11 p.c final 12 months. This 12 months it is going to be round 5-6%. Due to this fact, shut to five factors might lower in January. Due to this fact, once we come to the start of February, we’ll see a lower of 15 factors in complete. Which means that inflation might be round 70 p.c on the finish of the 12 months and round 65 p.c on the finish of January.

What does 5% month-to-month inflation imply? Do not consider it as ‘I multiply 5 by 12 I get 60’. You have to compound annual inflation of 5 p.c monthly. This truly corresponds to 80 p.c inflation. In different phrases, the non permanent lower in annual inflation as a result of excessive base impact of the earlier 12 months doesn’t imply that Turkey is profitable within the combat in opposition to inflation. The underlying pattern of inflation will nonetheless be pointing to 70-80 p.c each year.

Excessive wage will increase anticipated originally of the 12 months can even have an effect on different wages. Salaries of civil servants and pensions, along with a really massive funds deficit of 640 billion liras foreseen within the subsequent 12 months’s funds, the rise in public expenditures indicated by this, it’s extremely possible that the Central Financial institution has utterly deviated from pursuing a financial coverage aimed toward worth stability, as a result of upcoming elections. The truth that credit score enlargement can even come to the fore… When all these components are introduced collectively and contemplating the strain of price will increase, it’s nearly inevitable that we’ll see a rise in annual inflation particularly in March, April and Might.

Final 12 months, there was 14 p.c inflation in a single month as a result of change fee shock. We additionally noticed a really excessive inflation in January with the impact of the occupation of Ukraine by Russia. With the deactivation of this, we’ll see a lower in annual inflation in December-January; It’s true that by the tip of 2022 inflation will decline to round 70 p.c. That is a drop of over 10 factors from its present stage. It could even be doable that this can come down slightly in January. However I believe we will see double-digit month-to-month inflation, particularly in March-April. If credit score enlargement is as robust as I believe, then Turkey might even need to expertise a small pattern of hyperinflation that it has by no means seen in its historical past. However as I stated, we nonetheless have time forward of us, we by no means want for it, however…”


Prior to now, rate of interest cuts had been closely mirrored in change charges. However within the final reductions, we see that this isn’t the case. What occurred?

“Two issues are required for the Central Financial institution coverage fee to have an impact; first, a market economic system the place costs are freely decided by the selections and preferences of producers and customers, and worth formation is realized in response to provide and demand, and secondly, an open economic system is required. Sadly, Turkey, capital flows It has largely moved away from being an open economic system by way of economic system. It has once more misplaced its traits of a free market economic system to a substantial extent inside. At this time, regulatory and supervisory authorities determine who and at what worth banks may give credit score. We see that the loans are shrinking in actual phrases. There could be no financial enlargement with out loans, the circumstances concerning TL could be extraordinarily tight. Many corporations that at the moment produce in the actual sector sadly expertise and see this every single day. A variety of restrictions get he is getting greater. They are saying that ‘you possibly can solely make loans out there to banks in opposition to invoices, you possibly can solely make them out there to those establishments, you can not give loans to those that will purchase a home above this worth in housing loans’. Very heavy cost-increasing provision laws and securities holding obligations are imposed on banks. Due to this fact, decreasing the rate of interest has virtually no impact. In different phrases, banks can solely use the reserve cash they create with that low-interest borrowing to finance the treasury. That is why authorities bonds have low rates of interest, the Central Financial institution’s coverage fee is low, however inflation is excessive, and the change fee just isn’t affected by this. This will solely be doable for an imaginary nation that may produce all its wants in its personal home market. The truth that rate of interest cuts are usually not mirrored on the change fee just isn’t one thing to be blissful about. You possibly can evaluate this to a affected person within the intensive care unit who doesn’t react to exterior stimuli. This is a sign that the affected person’s situation is getting worse. I hope this error might be corrected and the persistence of this error might be stopped.”