Turkey’s consumer price index (CPI) inflation officially stood at 49% y/y in September versus 52% y/y in August, the Turkish Statistical Institute (TUIK, or TurkStat) said on October 3 (chart).

TUIK’s inflation series peaked at 75.45% in May. It has quickly fallen back to the 40%s thanks to the base effect. But putting out a headline figure of below 40% would perhaps prove too much of a stretch even for the country’s infamous statistical institute.

At 49% y/y, Turkey fell to sixth place in the world inflation league.

The Istanbul-based ENAG inflation research group of economists, meanwhile, calculated a Turkish inflation figure of 89% y/y for September. The ENAG figures recorded for May and August were 121% y/y and 90% y/y, respectively.

TUIK also gave an official figure of 33% y/y for producer price index (PPI) inflation in September.

Central bank tracks monthly inflation

TUIK also posted monthly official inflation of 3% for September after releasing 2% for August.

On October 2, TUIK said that it will start releasing seasonally-adjusted inflation figures one day after it releases its ordinary inflation figures.

The central bank tracks these figures. The first set will be released at 16:00 on October 4.

In the coming months, TUIK is set to deliver further outcomes in the 1-2%s for the official monthly headline indicator.

The central bank also tracks inflation expectations via its monthly "Sectoral Inflation Expectations" and "Survey of Market Participants" releases.

End-2024 inflation at around 42% y/y

On August 8, Turkey’s central bank kept its end-2024 official inflation "target" unchanged at 38% in its latest quarterly inflation report.

The upper boundary of the forecast range was also left unchanged at 42%.

The inflation report also reiterated that average "seasonally-adjusted" official monthly inflation would decline to 2.5% in 3Q24 and to below 1.5% in 4Q24.

On November 8, the central bank will release its next inflation report and updated forecasts.

As things stand, the Erdogan regime is getting ready to release an official inflation figure of about 42% y/y for December.

Positive real rate for first time since July 2021

In September, the monetary policy committee (MPC) of Turkey’s central bank kept its policy rate unchanged at 50% for the sixth straight month in line with market expectations.

The next MPC meeting is scheduled for October 17. The rate-setters at this point look poised to again stick with the 50% benchmark.

In the current circumstances, a 250bp rate cut is on the cards for the meeting to be held on November 21.

On November 29, TUIK will release its official GDP data for 3Q24. It looks like that a technical recession will be declared.

ECB to cut on October 17

Looking at the global markets, the European Central Bank (ECB) is expected to deliver another 25bp cut at its next monetary policy meeting, scheduled for October 17.

So far, the ECB has delivered two rate cuts that have brought its main refinancing operations rate to 3.65%. It stood at 4.50% in September 2023.

The Federal Reserve (Fed) is expected to deliver another 25bp rate cut at its next open market committee meeting, set to be held on November 7.

So far, the Fed has delivered a 50bp cut. It brought the upper limit of its federal funds target range to 5.00% on September 18 from 5.25% in July 2023.

Turkey’s CDS remain below the 300-level, while the yield on the Turkish government’s 10-year eurobonds remains below the 7%-level.

The possibility of some "short-breathed" turbulence at the beginning of November (due to seasonal fluctuations prior to the beginning of the new year rally along with the presidential elections in the US scheduled for November 5) should not be excluded. 

However, with the beginning of the new year rally, the easing atmosphere will be stronger felt.

Smooth nominal devaluation, real appreciation

Since end-August, the Erdogan administration has turned to its straight-line policy in the USD/TRY rate. The pair is currently drawing a line around the 34-level.

With September, carry trade inflows and eurobond sales resumed. There is now a short window ahead for renewed inflows prior to the possible shake-up in November.

As things stand, the regime’s smooth nominal devaluation and real lira appreciation policy is back on track.