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Turkish annual inflation dropped to 49.38% in September, but a higher-than-expected monthly rate of nearly 3% raised caution from the central bank. With the policy rate now above annual CPI, analysts predict interest rate cuts may not begin until next year despite earlier expectations.
Turkish annual inflation eased to 49.38% in September, while the monthly rate surged higher than expected to nearly 3%, prompting caution from the central bank and delaying anticipated interest rate cuts.
The central bank's policy rate, now at 50%, has surpassed the annual consumer price index (CPI) for the first time since 2021, marking a key point in the aggressive monetary tightening aimed at curbing inflation after years of easy money and rising prices.
However, Central Bank Governor Fatih Karahan warned that more progress is needed before reaching the bank’s inflation goals. He outlined two critical conditions: a significant and sustained decrease in the monthly inflation trend, and the alignment of expectations with the bank’s own forecast range. Last month’s inflation spike was partially driven by education-related costs.
Following the release of the inflation data, the lira strengthened slightly, trading at 34.18 against the dollar. Analysts have revised their expectations for interest rate cuts, with some now predicting no easing before next year. JPMorgan, which had initially forecast a cut in November, now expects easing to start in January. Capital Economics also sees a rate cut this year as "very unlikely."
Month-on-month inflation was 2.97%, above the 2.2% predicted by a Reuters poll. The annual CPI also exceeded the forecast of 48.3%. In August, inflation was 2.47% month-on-month, with an annual rate of 51.97%.
Although the central bank is closely monitoring the monthly inflation rate for signs of when to begin easing, it has only fallen below 2% once this year, in June. Analysts like Haluk Burumcekci suggest that even if October inflation aligns with central bank guidance, it may not be enough to trigger a November rate cut, with most analysts now expecting easing by 2025.
TIGHT POLICY
Turkish domestic producer price index rose 1.37% month-on-month in September, with an annual increase of 33.09%. Inflation was driven by sharp rises in housing (97.9%) and education costs (93.59%), while food prices increased 43.72%.
The central bank held rates at 50% for a sixth month, signaling potential easing but maintaining a tight stance until price stability is achieved. Households expect 12-month inflation at 71.6%, much higher than market forecasts of 27.5%. The bank predicts inflation will fall to 38% by year-end, while the government expects 41.5%.
The U.S. economy faces a 40% risk of recession in the second half of 2025, JP Morgan analysts said on Wednesday, citing rising tariffs and stagflation concerns.
China has ramped up efforts to protect communities impacted by flood control measures, introducing stronger compensation policies and direct aid from the central government.
Severe rain in Venezuela has caused rivers to overflow and triggered landslides, sweeping away homes and collapsing a highway bridge, with five states affected and no casualties reported so far.
A malfunction in the radar transmission system at the Area Control Center in Milan suspended more than 300 flights at the weekend, across northwest Italy since Saturday evening according to Italy's air traffic controller Enav (National Agency for Flight Assistance).
Thousands of protesters rallied in Bangkok on Saturday, demanding Prime Minister Paetongtarn Shinawatra resign as political and economic tensions mount.
Gold prices edged higher on Monday after slipping to their lowest level in more than a month, supported by a weakening U.S. dollar and easing geopolitical tensions that have tempered safe-haven demand.
The French Riviera town of Cannes will restrict large cruise ships from docking starting from January 2026, as part of new efforts to manage over tourism and protect local infrastructure.
Polish refiner Orlen will not buy Russian oil for its Czech refinery after 30 June, Chief Executive Ireneusz Fafara said on Monday. "We freed Central Europe from Russian oil today," Fafara stated.
Starting today, British car and aerospace manufacturers will benefit from significant tariff reductions when exporting to the United States, thanks to the implementation of a landmark UK-US trade agreement. This move is expected to safeguard thousands of jobs in the United Kingdom.
Oil prices fell on Monday as an easing of geopolitical risks in the Middle East and the prospect of another OPEC+ output hike in August improved supply expectations amid persistent uncertainty over the outlook for global demand.
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