Türkiye’s inflation jumps to 33.29% in September
Türkiye’s annual inflation rate rose sharply to 33.29% in September, exceeding analysts’ expectations, according to official data released Friday, adding to the challenges facing the central bank as it seeks to balance supporting growth with curbing prices.
The Turkish Statistical Institute said inflation rose 3.23% month-on-month, exceeding analysts’ estimates of 2.6% in a Reuters poll.
The annual reading also came in above expectations, which had predicted a decline to around 32.5%. Inflation in August was 2.04% month-on-month and 32.95% year-on-year.
Last month, the Turkish Central Bank cut its key interest rate by 250 basis points to 40.5%, following a larger 300 basis point cut in July.
It indicated at the time that it could reduce the pace of the cut depending on the trajectory of inflation.
However, the sudden rise in prices could put limits on monetary easing plans.
“I fear the data suggests the central bank is cutting interest rates too early and too aggressively, which could erode some of the hard-won credibility it has regained,” Tim Ash, senior analyst at BlueBay Asset Management, said on X.
The data put pressure on markets, with the Turkish lira settling at a record low of 41.685 to the dollar, while the banking sector index fell 1.3% amid a general decline in stocks.
Morgan Stanley had previously forecast that the central bank would continue to cut interest rates, but at a slower pace of no more than 200 basis points at this month’s meeting, unless positive surprises emerge.
Official data also showed that the domestic producer price index rose 2.52% month-on-month in September, marking an annual increase of 26.59%.
The Turkish Central Bank faces a difficult dilemma: continue to support economic growth by lowering interest rates, on the one hand, or tighten monetary policy to control inflation, which remains far from target levels.
