Türkiye’s annual inflation eased further in September, marking a continuation of the trend that began early in the summer, official data showed on Thursday, falling below the central bank’s policy rate for the first time since 2021.
Turkish annual consumer price inflation dropped to 49.38% last month, the data from the Turkish Statistical Institute (TurkStat) showed, markedly below the peak of 75.5% in May but exceeding expectations.
The reading marked the lowest level since July 2023 when inflation hovered at 47.8%, and comes after a series of interest rate hikes by the central bank.
The Central Bank of the Republic of Türkiye (CBRT) began to raise rates last year to contain soaring prices and it has lifted its key policy rate by a total of 4,150 basis points.
Month-over-month, September consumer price index (CPI) was 2.97%, TurkStat said, compared to a 2.47% increase from July to August.
Commenting on the figures, Treasury and Finance Minister Mehmet Şimşek said in a social media post that the “disinflation process” that commenced in June “is continuing.”
He said on X that while core goods inflation was relatively low at 28.3% year-on-year, the rigidity stemming from backward-looking pricing behavior has caused services inflation to decline at a comparatively slow pace.
“The disinflation period that began in June continues. This period will be followed by a period of stability that will begin in the second half of next year during which we will ensure a permanent decrease in inflation, reaching single digits,” he added.
“We continue to implement all our policies in coordination and determination in line with our price stability target.”
Inflation figures are being watched closely with market attention focused on the timing of possible interest rate cuts by the central bank, with a Reuters poll last month showing that a first cut is seen around November.
The poll at the time also showed a growing minority of analysts expecting a first cut next year, with the consensus settled around November and expectations of at least 20 points of easing by the end of 2025.
But Haluk Bürümcekçi, founding partner at Bürümcekçi Consulting, said the September data did not signal an imminent cut. Even if October inflation is in line with the central bank’s guidance, he said, “it may not be sufficient” for a November cut.
In the Reuters poll, annual inflation was forecast to be 48.3% in September. The survey by Anadolu Agency (AA) also pointed to a slightly lower rate of 48.11%.
Annual inflation in September was driven by a 97.9% rise in housing prices, with education prices up 93.59%. The key food and nonalcoholic drinks sector prices were up 43.72%, below the overall level of inflation.
Last month, the Turkish central bank held its main interest rate steady at 50% for a sixth straight month saying it remained highly attentive to inflation risks but removing a reference to potential tightening.
Commenting on the data and a smaller-than-expected decline, Nicholas Farr, emerging Europe economist at the London-based Capital Economics said the figure showed that a monetary easing cycle was unlikely to start until 2025, later than most other analysts have been forecasting.
Farr said inflation would fall further over the coming months but that the central bank’s end-year forecast of 38% “looks way out of reach.”
The “data makes an interest rate cut this year look very unlikely to us,” Capital Economics said in a note. The central bank is closely watching the monthly rate for signals of when to begin an easing cycle.
According to the central bank’s forecast, inflation will ease to 38% at the end of this year and 14% next year.
In the medium-term program, the government sees end-2024 inflation of 41.5%.
The domestic producer price index meanwhile was up 1.37% month-over-month in September for an annual rise of 33.09%, the data showed.
