Inflation data bolsters expectations for October rate cut

ISTANBUL

Türkiye’s cooler-than-anticipated September inflation has bolstered analysts’ confidence that the Central Bank will lower interest rates by 100 basis points at its Oct. 22 meeting.

Annual consumer inflation slowed to 29.7 percent in September, falling below 30 percent for the first time since November 2021, while monthly inflation came in at 1.84 percent, undershooting market expectations.

İş Yatırım said food prices were the main driver behind the downside surprise in September inflation, with vegetable and fruit prices falling sharply during the month. The brokerage said the inflation reading strengthened expectations for a 100-basis-point rate cut at the Monetary Policy Committee meeting on Oct. 22. It expects annual inflation to ease to around 30 percent by the end of the year and sees the policy rate ending 2026 at approximately 35 percent.

According to Gedik Yatırım, the weaker-than-expected inflation reading strengthened expectations for a 100-basis-point rate cut at the Oct. 22 meeting. It forecasts year-end inflation at 30 percent and the policy rate at around 35 percent.

Akbank Economic Research said the improvement in inflation dynamics, despite ongoing cost pressures, had created some room for monetary easing. The bank expects a 100-basis-point rate cut as its base scenario for October, but said a 150-basis-point reduction could also be possible depending on market and pricing developments in the coming weeks. Akbank maintained its year-end inflation forecast at 30 percent and its policy rate forecast at 36 percent.

The bank nevertheless cautioned that additional fuel-price adjustments, cost pressures not yet fully reflected in consumer prices and higher global interest rates argue for a cautious approach regarding the pace and continuity of rate cuts.

ÜNLÜ & Co said the widening gap between the policy rate and inflation provided the Central Bank with room for around 200 basis points of easing, and it expects a 100-basis-point rate cut in October, provided there is no significant change in domestic or global conditions before the meeting.

The brokerage maintained its year-end inflation forecast in a range of 28 percent to 30 percent.

Şeker Yatırım said an October rate cut now appeared almost certain, although the size of the move would depend on developments in energy markets and the trajectory of October inflation reflected in leading indicators. The brokerage also said it believed supply-side shocks had been largely offset by the slowdown in demand

The reports broadly agreed that the latest inflation data strengthened the case for monetary easing, while differing in their assessments of how much room the Central Bank has for rate reductions in the coming months.