TURKSTAT released December inflation on Monday, and with the higher-than-expected turnout of 0.53%, 2009 inflation turned out to be 6.53%.
This means that I was right on target back in June, when I updated my forecasts.
I have to admit I was expecting 2009 inflation to come out a bit lower than that when I evaluated my forecasts at the end of August. At the time, I was not bold enough to supply a point estimate, offering a projection of 6-6.5% instead. To be perfectly honest, I was seeing December inflation at around 0.4%, which would brought yearly inflation inside this range, but food prices turned out to be even higher than my out-of-consensus projection.
But still, compared to all the "wiseguys" seeing year-end inflation at 5-5% percent, I have done quiet well. But would someone following these forecasts have made any money out of them? Probably not, as the differential between expectations and realizations was not that high.
Moreover, the Central Bank managed to steer expectations quite well in the past couple of months, warning on "temporary" increase in inflation late in the year. BTW, the Bank is still using the same strategy, but their job will get more difficult with each inflation release in the next 3-4 months, as I argued a couple of weeks ago.
Finally, you can make the best forecasts, but something unexpected could always mess things up, as a friend who is Head of Research of a portfolio management company recently recounted: They actually managed to forecast inflation at exactly 0.53%, i.e. bull's eye, a marksmanship even your friendly neighborhood economist has been bestowed with only a couple if times. Usually, when you are so out-of-consensus, you would tread water lightly. But they did put their money where their forecasts were, selling bonds on December 29. It would have been a wise decision, except that the very same night, IMF rumors, which will probably prove to be unfounded once again, caused a huge bond rally. Upppss......
As a side point, all these references and flashbacks have made me aware of yet another advantage of blogging. If you blog, your occasional "I told you so" becomes much more credible once you link to the posts when you had actually told so:)
As another side point, all this shows that forecasting is a really messy business. Inflation was the one way out-of-consensus and the least likely to be realized from my number of the beast forecasts. It turned out to be on target, whereas my more traditional growth and budget deficit forecasts will likely be a bit off-the-mark. But you never know. I might get LUCKY again:)....
This means that I was right on target back in June, when I updated my forecasts.
I have to admit I was expecting 2009 inflation to come out a bit lower than that when I evaluated my forecasts at the end of August. At the time, I was not bold enough to supply a point estimate, offering a projection of 6-6.5% instead. To be perfectly honest, I was seeing December inflation at around 0.4%, which would brought yearly inflation inside this range, but food prices turned out to be even higher than my out-of-consensus projection.
But still, compared to all the "wiseguys" seeing year-end inflation at 5-5% percent, I have done quiet well. But would someone following these forecasts have made any money out of them? Probably not, as the differential between expectations and realizations was not that high.
Moreover, the Central Bank managed to steer expectations quite well in the past couple of months, warning on "temporary" increase in inflation late in the year. BTW, the Bank is still using the same strategy, but their job will get more difficult with each inflation release in the next 3-4 months, as I argued a couple of weeks ago.
Finally, you can make the best forecasts, but something unexpected could always mess things up, as a friend who is Head of Research of a portfolio management company recently recounted: They actually managed to forecast inflation at exactly 0.53%, i.e. bull's eye, a marksmanship even your friendly neighborhood economist has been bestowed with only a couple if times. Usually, when you are so out-of-consensus, you would tread water lightly. But they did put their money where their forecasts were, selling bonds on December 29. It would have been a wise decision, except that the very same night, IMF rumors, which will probably prove to be unfounded once again, caused a huge bond rally. Upppss......
As a side point, all these references and flashbacks have made me aware of yet another advantage of blogging. If you blog, your occasional "I told you so" becomes much more credible once you link to the posts when you had actually told so:)
As another side point, all this shows that forecasting is a really messy business. Inflation was the one way out-of-consensus and the least likely to be realized from my number of the beast forecasts. It turned out to be on target, whereas my more traditional growth and budget deficit forecasts will likely be a bit off-the-mark. But you never know. I might get LUCKY again:)....
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