Central Bank's 2008 Inflation Estimate

Central Bank finally caught up with the markets and updated its end-2008 inflation estimate to 10.6% from 9.3%. Despite the surprise decline in July inflation, CB determined that oil prices will average $140 for the rest of the year and this warranted an increase in inflation estimate.

Even though i don't think oil prices will be as high as CB estimates, considering that they have been behind the curve since August 2007, I welcome this revision as a step in the right direction. I still suspect that inflation will be above 11% by the end of the year. CB lost considerable credibility since CB president Durmus Yilmaz appointed in 2006. As a result, it is too early to comment on the 2009-2011 inflation estimates. It looks almost certain that Turkey will be one of the countries that will experience double digit inflation rates in 2008.