The effect of commodity prices on inflation

Recently, the disruptions in global supply chains, armed conflicts in critical commodity-producing regions, slowing economic growth, and inflation have been triggered at a global level in the aftermath of the COVID pandemic. As of 2021, inflation rates have increased in many countries around the world. While there are many reasons for this, factors such as decreased economic activity, supply chain issues, supply shortages, labor shortages, and changes in monetary policies, especially during the pandemic period, have triggered inflation. In 2022, the global core inflation rate was 2.8% and the global general inflation rate was 7.5%. Today, in all over the world economies are searching for ways to cope with the inflationary environment. The purpose of this study is to reveal the relationship between high inflation faced by Turkey and the changes in world commodity index prices, and to draw attention to the steps that need to be taken and the investments that need to be made in accordingly. The study examines the goods and services included in Turkey's inflation basket, the commodity index components required for their emergence, and Turkey's foreign dependencies on these components. All data sets were investigated in monthly terms and in the period range of 2010:1 - 2022:12, and the causal relationship between commodity main components and CPI was examined. As a result of the study, it was concluded that except Precious Metals (PPMETA) there was a relationship between all other emtia indexes and inflation in Turkey, each with different rates and different levels of stationarity.