Citi Economists' Assessment of September Inflation and the Central Bank of the Republic of Turkey (TCMB)

Citi's September Inflation Assessment

Citi economists İlker Domaç and Gültekin Işıklar evaluated the September inflation data. According to the economists, the current inflation data reveals the effects of a challenging inflation outlook, along with weakening domestic demand and labor market conditions on monetary policy.

Factors to Consider in Monetary Policy

Domaç and Işıklar stated in their report, "Decreasing growth expectations and rising unemployment rates may complicate the Central Bank of the Republic of Turkey (CBRT)'s ability to maintain a restrictive stance in the long term. However, the deviation of inflation expectations from targets provides a strong justification for a cautious interest rate reduction cycle," they noted. In this context, they expect the policy rate to reach 37% by the end of the year.

Recent Interest Rate Cuts by CBRT

In September, the CBRT cut the policy rate from 43% to 40.50%. Citi predicts that inflation will decline from 44.4% to approximately 30% by the end of the year, but stresses that upward risks remain.

September Inflation Data

According to the Turkish Statistical Institute, the monthly inflation rate in September 2023 was 3.23%, significantly above the expectation of 2.50%. The annual inflation rate was 33.29%, exceeding the forecast of 32.5%.