What is Wrong with Inflation?

Turkey: Finally some good news on inflation

"Turkey’s State Institute of Statistics has published the May inflation numbers. Turkish consumer prices (CPI) came out at 9.23% y/y (0.50% m/m) - below the consensus expectation of 9.6% y/y. Similarly, producer prices (PPI) were up 7.14% y/y (0.39% y/y) in May - also below the consensus expectation of 7.4% y/y. The downward surprise on CPI mostly reflects lower-than-expected food prices. Over the last couple of months food prices have surprised a bit on the upside - in May we saw a bit of a “mean-reversion” in the food prices.

Overall, this is good news and inflation should drop further in the coming months, but inflation is still likely to remain elevated and significantly above the Turkish central bank’s (TCMB) official inflation target of 4% by the end of the year. We now see inflation around 7-7½% by the end of the year. "

Is that so?

Both CPI and core CPI figures declined in May. The problem is that if we look at other "core inflation measures" like median CPI and trimmed mean, we don't observe any downward trend. On the contrary, the trend is upwards. It seems that the recent drop in inflation owes too much on volatile food prices (which happen to decrease in May).

The inflation report is at best "good news" with an asterix.