Turkey’s central bank has kept its end-2024 official inflation "target" unchanged at 38% in its latest quarterly inflation report, released on August 8.

The upper boundary of the end-of-year forecast range also remains the same at 42%.

Under usual circumstances, the central bank releases "forecasts" in its inflation reports. The annual inflation target has in fact long stood at 5%. However, during press meetings held to take questions on the last few inflation reports, the officials have taken to suggesting that they actually treat their end-2024 forecast as their "target".

The issue was again raised during the Q&A session at the latest press briefing, when comments from the officials implied that President Recep Tayyip Erdogan's regime is, as things stand, getting ready to release an official inflation figure at around 40-42% for December.

Their quarterly report, meanwhile, reiterated that average "seasonally-adjusted" official monthly inflation will decline to 2.5% in Q3 and to below 1.5% in Q4.

Tweets: @VeFinans: “The official inflation index rose by 29% as of end-July compared to end-2023. In the final five months of the year, if the average [unadjusted] official monthly inflation releases come in at 1.40%, end-2024 inflation will come in at 38%. For 42%, an average of 1.98% is required.”

Comment: “[Official statistics body] TUIK can release whatever they want. No problem.”

The matter of seasonal adjustment is another issue worth looking at as the central bank does not explain how it adjusts the official inflation series. It also does not release an adjusted series.

When again asked about the adjustment, central bank governor Fatih Karahan said that the authority has created a committee with the Turkish Statistical Institute (TUIK, or TurkStat) that deals with the release of the adjusted series.

The TUIK remains another issue that won't go away. No one, including the Erdogan regime personnel and the statistical institute’s own personnel, believes the official data it releases.

Karahan also mentioned that the TUIK’s reputation is important. As another example of the seriousness with which the regime's officials go about their work, when asked about whether 500-lira and 1,000-lira banknotes will be printed, Karahan said that he would choose to skip this question since he replied to it last month.

Last month, he said that there were some formulas to determine the necessity of new banknotes, but he did not specify the formulas he had in mind.

Currently, more than 80% of the banknotes in circulation are 200-lira, the largest available banknote, due to the hyperinflation seen in Turkey across recent years.

President Erdogan will not allow the release of bigger banknotes. Across the 1990s, Turkey even used million-lira banknotes and Erdogan is proud of how he rearranged things to drop six zeroes in 2006. So you can see why he hesitates to add new zeros now.

The central bank's officials – who have rejoiced under the title of "orthodox" since Erdogan, facing an economic abyss, tacitly agreed that, at least for now, "Erdoganomics" had had its day –  have also been parroting lately how it is clear the inflation expectations of households, the real sector and financial market participants are at odds with each other.

Accordingly, households see official inflation standing in the 70%s 12 months from now, while the real sector sees it in the 50%s and financial market participants expect it will be in the 30%s.

The figures are based on surveys conducted by the central bank. They should not be treated as the absolute expectations of all households, real sector players and market participants.

However, the "orthodox" management circulate the argument that some global trends and some contentions in the literature provide explanatory reference points when it comes to the differentiation in the expectations.

What is actually happening, though, is so very much simpler than they'd have us believe. Households think that inflation is currently running at above 100% in reality while the real sector digests the price growth figures released by the Istanbul Chamber of Commerce (ITO), which take us into the 70%s, while the market participants stick with the official TUIK releases.

True, each group does actually expect a fall in inflation, but that's something that mathematically has to happen anyway due to the base effect.

A regime that on the one hand cannot even measure inflation is, on the other hand, all too ready to discuss inflation theories and "high-level" statistical models. But they then turn to openly threatening the Turks. The message is, change your inflation expectations or you will face high rates over the long term that won't budge.

The central bank’s "legal persons", meanwhile, argue that they are not threatening the Turks, but are simply stating to them the obvious.

In truth, it goes something like this: “I will keep beating you if you do not do what I want you to do. That's not a threat. I am just telling you what will happen.”

If the only problem with the regime was its inflation figures and monetary "policy", these discussions would have meaning. However, this is a regime that has a reputation for faking everthing (don't kid yourself that all of the "Erdoganomics" have gone away), while also making salutary use of repression, lawlessness and violence.

The bne IntelliNews news archives are as heavy as an ocean liner, weighed down by the regime's depredations.

But onwards we go.

On October 31, the central bank will release its next inflation report and updated forecasts.

In June 2023, following the post-election appointment of Turkey’s new economic team led by finance minister and ex-Wall Street banker Mehmet Simsek, the regime U-turned on monetary policy and launched a tightening process that is ongoing.

The policy rate was hiked to 50% by March this year from 8.5% in June last year. Across the last four months, the policy rate has remained at 50%.

The next monetary policy committee (MPC) meeting is scheduled for August 20. The rate-setters at this point look set to again stick with the 50% benchmark.

On August 5, the TUIK said that Turkey’s consumer price index (CPI) inflation officially stood at 62% y/y versus 72% y/y in June and 75% y/y in May.

TUIK also posted monthly official inflation of 3% for July. It released a 2% month on month rate for June, after releasing 3% m/m figures for the three previous months.

Beyond July, TUIK is set to deliver further outcomes in the 2-3%s for the official monthly headline indicator.

TUIK’s inflation series reached its peak at 75% in May. It is quickly falling back to the 40%s thanks to the mentioned base effect.

Pushing the headline figure to below 40% would perhaps prove too much of a stretch for the country’s infamous statistical institute, despite its bendy sums.

Looking at the global markets, the market turbulence that occurred on August 5 had no significant impact on Turkey. Turkey’s CDS remain below the 300-level, while the yield on the Turkish government’s 10-year eurobonds remains below the 8%-level.

When there is no volatility, there is no return. Drying liquidity conditions in financial markets in August (everyone is at the seaside) provide an opportunity for those who seek some usable volatility.

The next seasonal opportunity for seekers of a crash is November, just prior to the new year rally in December. This year, we also have the presidential race in the US scheduled to culminate on November 5.

In June, the European Central Bank (ECB) delivered a rate cut while the Federal Reserve (Fed) has been delaying the delivery of its expected rate cut.

Between March and July, the Erdogan administration applied its straight-line USD/TRY rate policy. It drew a line around the 32-level this time around.

With August, the 33s are seen as the new USD/TRY level.

In the last few weeks, portfolio inflows and reserve accumulation have remained flat.