In the past six years, Turkey has experienced remarkable disinflation (from an average of 70.4% in the period of 1993-2002 to single-digit rates) as well as a marked decline in the volatility of inflation. As a result of tight fiscal policies and prudent monetary policies, inflation has declined to single digit in 2004.

Turkey’s inflation rate, measured by the consumer price index, declined from an average of 70.4% in the period of 1993-2002 to 7.7% at the end of 2005, the lowest reading in over three decades. During the course of 2007, the CPI inflation rate fell from 9.7% in December 2006 to 8.39% in December 2007. Inflation excluding food, energy and tobacco was at 4.8%.

Over the course of the year, the largest upward contribution came from alcoholic beverages and tobacco. The highest increase was 17.20% in the index for alcoholic beverages and tobacco compared with the same month of the previous year. Food and non-alcoholic beverages (12.03%), housing (11.48%), hotels, cafes and restaurants (10.7%) were the other indices where high increases were realised.

The preparatory works on the new indices of inflation were completed in 2004. As of January 2005, the Turkish Statistical Institute started using an improved CPI calculation mechanism which employs an updated basket and relative weights of the goods and services. In parallel, WPI was left and instead, a PPI was introduced.

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