Inflation peak likely to be here: 85.51%


The peak in annual consumer prices for this year has likely already occurred. Monthly inflation rose by 3.54% and annual inflation reached 85.51% in October. If the hike in November remains below 3.51%, a decline, which we have long been talking about, will begin. If inflation exceeds 3.51% in November, the annual rate will continue to surge, the peak will be seen in November and the decline will start in December.

Then, the annual rate of increase will go down. Let’s emphasize once again that the situation will be used politically. Moreover, it’s too obvious what is going to be stated after the policy rate is cut to 9% this month: “Look, we’ve cut the interest rate and reduced inflation!”

Unfortunately, there is a segment of the population that can’t perceive that the decline in the rate of increase in inflation doesn’t mean a decrease in prices, and some strive to keep this segment ignorant. Those who must warn this segment of the reality of the situation seem to be failing, as well.

We stood on our own two feet until September 2021, though we had a big inflation difference with the West.The policy rate has seemingly been cut from 16% to 10.50%, but the first step was actually taken in September 2021. So, we’ve actually reduced the interest rate from 19% to 10.50%.

Annual inflation jumped from 20% to 86% in October, year-over-year, according to the Turkish Statistical Institute. The Istanbul Chamber of Commerce’s annual inflation climbed from 21% to 109%. The domestic producer price index (D -PPI) soared from 46% to 158%. USD/ TRY jumped from 9.00 to 19.00. We were poisoned month after month. And for what?

So that the wheels turn, production, employment, and growth continue. But at what cost?

Moreover, the revaluation rate (RR) was revealed as 122.93% for 2023. I want to emphasize once again that the RR isn’t determined by a person or an authority. It refers to the annual average hike in D -PPI in October, which is part of the D -PPI data from TurkStat.

The RR will result in an increase in a series of taxes, charges, and fines. For instance, the hike in property tax generally corresponds to half of the RR. But President Recep Tayyip Erdogan is entitled to determine a different rate of increase on the condition he sticks with the RR.

President Erdogan can also reduce the hike in the motor vehicles tax (MTV). But this reduction has a limit. The RR can be reduced by 80% at most for MTV. So it will be at 24.58% even if the 122.93% RR is cut by 80%. But this isn’t expected at all. President Erdogan will make the final decision.

Income tax brackets normally increase at the rate of RR. The first bracket, which still stands at TRY 32,000, will rise to TRY 71,000 if the RR is fully implemented. But this isn’t expected for 2023.

The President isn’t entitled to implement a different RR rate for traffic fines. If a new regulation isn’t implemented, the current fines will be raised by 122.93%.

As they say, the fines are a bomb.

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