An assessment of the Central Bank of the Republic of Turkey’s survey of expectations

After the financial and currency crisis in 2001, a new monetary policy era had begun in Turkey leading to a policy switch from fixed exchange rate to inflation targeting regime. This new monetary policy regime necessitates managing inflation expectations to curtail inertia in inflation dynamics. In line with these developments, Central Bank of the Republic of Turkey decided to conduct a survey for measuring inflation expectations, as they comprise an important part of the transmission channel of monetary policy. Accumulated survey data enable us a comprehensive assessment of medium-term inflation expectations. The aim of this paper is to discuss the properties of the survey and investigate 12-month ahead inflation expectations. A detailed evaluation of inflation expectations in terms of changes in their distribution and forecasting performance is given at aggregate and sectoral levels.