Central Bank raises inflation target by 3 points at the very beginning of the year

Meriç KÖYATASI

The Central Bank raised its inflation expectation from 21 percent to 24 percent at its very first inflation report meeting of the year.

There is a point we have been making from the beginning. Inflation cannot be lowered solely through monetary policy. First, fiscal policy must assist in this. Furthermore, production, especially in agricultural products, must be increased. Neither exists in Turkey. Moreover, far from being cut, the state's extravagant expenditures are increasing every year. There is no planning in the economy and production. There are no incentives or policies aimed at increasing production in the real sector and agriculture. In the real sector, there are only incentives aimed at favoring cronies and enriching cronies. We have written and explained on television many times that inflation expectations made without taking these into account are invalid.

Additionally, we have written multiple times in 12 Punto. We said, "Since you say wages should increase by the expected inflation rate, then I am calling on the President. Let him apply the Revaluation Rate as 22 percent, not 44 percent."

There is a definition called Administered and Directed Prices. This definition refers to prices determined by the state.

Minister of Finance Mehmet Şimşek also said several times, "We will make increases in administered and directed prices in line with the targeted inflation," but this promise of his did not materialize either.

High-rate hikes were applied to prices determined by the state. As a result, when January inflation came out at a high rate of 5 percent, the Central Bank also increased its inflation forecast from 21 percent to 24 percent.

Central Bank Governor Karahan explained the sources of this 3-point increase as follows:

"1.7 points of the 3 points come from administered and directed prices, 0.8 points from the changes in the weights in the TUIK inflation basket, and 0.5 points from unprocessed food products."

The Central Bank announced the lower limit of the inflation target as 19 percent and the upper limit as 29 percent. Here, I can say this for the Central Bank: Under all these conditions, its upward revision of the inflation expectation at the very beginning of the year can be criticized. But if it had insisted on a target that no one believed would be realized, its credibility would have been damaged even more. It did not insist on the error. Yes, the Central Bank is the one that determines the inflation target and is responsible for fighting inflation, but the responsibility for this deviation lies more with the government's economic policies than with the Central Bank.

If we look at the government's fiscal and economic policies, the year-end expected inflation will not be able to be kept even at the 29 percent that the Central Bank set as the upper limit. Now it is time to discuss the 30 percent wage increases for workers and the laughable increases in pension salaries again...

News Source: 12punto