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This article was originally written for Türkiye Today’s weekly economy newsletter, Turkish Economy in Brief, in its Oct. 12 issue. Please make sure you are subscribed to the newsletter by clicking here.
Türkiye’s September inflation figures sent important signals that could support financial markets, even as oil prices remain above $100 per barrel and fuel-related inflationary pressures persist.
According to data from the Turkish Statistical Institute (TurkStat), consumer prices rose 1.84% month-over-month in September. Most forecasts pointed to an increase of between 2% and 2.2%, meaning the actual figure came in below expectations.
Annual inflation fell to 29.73%, taking annual consumer price inflation below 30% for the first time in 58 months, or since November 2021.
The lower-than-expected inflation figure, together with signs of slowing domestic demand and an improvement in underlying inflation trends, has strengthened market expectations that the Central Bank of the Republic of Türkiye (CBRT) will resume its interest rate-cutting cycle.
The CBRT’s policy rate currently stands at 37%. The gap between the policy rate and inflation has now widened to more than 7 percentage points, marking its widest level in recent months.
Reports released after the inflation data pointed to expectations of a 100-basis-point rate cut.
Is Yatirim says the easing of underlying monthly inflation to around 1.7% and the slowdown in domestic demand give the CBRT more room to maneuver. The brokerage considers a rate cut at the Oct. 22 meeting a strong possibility and expects cuts of 100 basis points in both October and December. Under this scenario, the policy rate would fall to 35% by the end of the year.
Kuveyt Turk Yatirim also expects a 100-basis-point cut at the Oct. 22 meeting, forecasting that the policy rate will decline from 37% to 36%. The institution sees room for a total of 200 basis points in cuts by the end of the year and maintains its year-end 2026 policy rate forecast at 35%.
Albaraka Turk offers a similar outlook. It expects the CBRT to cut rates by 100 basis points at both its October and December meetings if the improvement in underlying inflation continues and domestic demand remains weak.
Some assessments suggest the rate cut may exceed 100 basis points.
Ak Yatirim says the current macroeconomic outlook would support a cut of more than 100 basis points in the absence of dollarization and reserve constraints. Depending on market and price developments during the month, the brokerage says a 150-basis-point cut at the Oct. 22 meeting is also possible.
Oyak Yatirim similarly expects a cut of between 100 and 150 basis points. The institution views the improvement in the underlying inflation outlook positively despite high oil prices and the Iran-US conflict.
Meanwhile, several institutions have begun lowering their year-end inflation forecasts following the September data. The 1.84% monthly increase in consumer prices and the decline in annual inflation to 29.73% — below 30% for the first time in 58 months — have prompted some institutions to revise their 2026 year-end inflation projections downward.
Is Yatirim lowered its year-end 2026 inflation forecast to 29.50% from 29.70% following the September figures. The institution said the easing of underlying monthly inflation to around 1.7% supports the disinflation process.
Oyak Yatirim also cut its year-end consumer inflation forecast to 29.2% from 29.5%. It said the improvement in the underlying inflation outlook continues despite high oil prices, largely reflecting weaker domestic demand.
Some institutions expect inflation to fall below 29% by year-end. Alnus Yatirim forecasts 28.88%, while Kuveyt Turk Yatirim expects 28.8%.
These forecasts also point to a slowdown in underlying inflation trends. Cooling domestic demand is emerging as a key factor supporting the disinflation process.
Garanti BBVA and Akbank, meanwhile, are maintaining their year-end inflation forecasts at 30%.
Akbank says food prices were a particularly important factor behind September inflation coming in below expectations. It also notes that weak demand conditions are limiting the pass-through of sharp fuel price increases to consumer prices. However, the institution says accumulated cost pressures in some food categories, where prices have remained relatively moderate in recent months, warrant close monitoring in the period ahead.
Assessments from foreign institutions point to differing views.
Citi expects the central bank to cut its policy rate by 100 basis points in October and maintains its year-end policy rate forecast at 35%.
Goldman Sachs, however, argues that it is too early for the central bank to begin an easing cycle, noting that market expectations for a rate cut differ from its own forecast.
Overall, the prevailing market view is that weak domestic demand supports an interest rate cut despite high oil prices.
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