Fed rate hike expectations strengthen after US inflation data
As consumer prices in the US rose in August, expectations for a Fed rate hike strengthened in the markets, while the drop in oil prices and CBRT expectations were also on the market agenda.
In the US, consumer prices increased by 0.4 percent monthly and 3.4 percent annually in August, and inflation expectations trending upward strengthened pricing pointing to an interest rate hike by the US Federal Reserve.
Impact of US Inflation on the Market
In August, consumer prices in the US increased by 0.4 percent monthly and 3.4 percent annually. While core inflation declined on an annual basis, it recorded an increase on a monthly basis.
The acceleration of inflation and expectations that pressures will increase pushed the probability of the Fed going for a 25 basis point rate hike next week to around 90 percent.
Sharp Fluctuation in Oil Prices
Another development closely monitored in the markets was the drop in oil prices. The barrel price of Brent crude retreated to 103 dollars during the day.
The International Energy Agency lowering its oil demand forecasts for this year played a decisive role in this downward movement in prices.
Course in Gold and Foreign Exchange Markets
While hawkish projections regarding the Fed supported the dollar index, the ounce price of gold followed a volatile course and traded at around 4,334 dollars.
Domestically, gram gold continued its course of the last week and continued to be priced around 6,850 TL.
Foreign Banks' CBRT Expectations
Following the monetary policy steps of the CBRT, international institutions shared new interest rate and growth expectations for the Turkish economy.
While Deutsche Bank expects a rate cut in the fourth quarter, Bank of America stated that a cut is on the table in October, and Morgan Stanley noted that TL carry trade transactions maintain their attractiveness.
Market Year-End Inflation Expectation
According to CBRT data, the market's September CPI increase expectation rose to 2.12 percent, and the year-end CPI increase expectation rose to 29.61 percent.
Various updates also took place in the participants' 12-month and 24-month ahead CPI expectations, as well as year-end current account deficit and GDP growth projections.