Mean Reversion Reigns

TURKEY - Report 03 Dec 2013 by Murat Ucer
After a few bad prints of late, CPI inflation surprised favorably today, which is not that unusual historically, given the mean reverting nature of the gap between actual and forecasted inflation (Graph 1).The surprise, in turn, as it is also often the case, was driven by food prices to a large extent, but a more benign print in clothing and shoes subcategory appears to have helped as well.Core inflation (I-index) also eased, which is a positive, but we think it is too soon to call this a trend deceleration, given its close relation to the exchange rate (Graph 2) and relative resilience in ...

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