Inflation falls below expectations in August while annual rate declines
Consumer inflation rose by 1.84% in August without exceeding expectations, while the annual rate dropped to 31.51%. The rise in C core inflation to 30.07% remains a decisive factor in the CBRT's policy.
According to data from the Turkish Statistical Institute, consumer inflation recorded a 1.84% increase in August, and annual inflation declined to 31.51%. While declines in apparel and fresh fruits and vegetables limited the increase, the annual rise in C core inflation and high oil prices are affecting the process ahead for the Central Bank.
Inflation Remains Below Expectations
According to data from the Turkish Statistical Institute, consumer inflation came in at 1.84%, remaining below the market expectation of 1.95% in August.
Annual consumer inflation, meanwhile, declined from 31.75% in July to 31.51% in August.
Impact of Sub-Items on Inflation
The decline in fresh fruit and vegetable prices in August and the discount season in the apparel and footwear sector were among the main factors limiting the rise in inflation.
While the transportation group provided the highest contribution to monthly inflation with a 4.82% increase, high fuel prices persisted despite the SCT support on diesel.
Annual Increase in Core Inflation
The C core inflation—excluding energy, food, beverages, tobacco, and gold, which is closely monitored by the CBRT—showed a monthly increase of 1.81% and rose to 30.07% on an annual basis.
Although headline inflation remained below expectations, the fact that C core inflation exceeded the 30% threshold on an annual basis drew attention in the markets.
CBRT Policies and Interest Rate Expectations
Market experts state that the Central Bank of the Republic of Turkey's hand has been complicated at its September 10 meeting due to oil prices climbing up to $95 and high core inflation.
While the CBRT is mostly expected to keep its policy rate constant at the September meeting, 100 basis point cuts each are anticipated in the October and December periods.
Other Developments Observed in Markets
Following the announcement of the inflation data, stock indices followed a negative trend, while the intraday rise in the banking index reached 2.7%.
In September, educational services and new-season apparel products are expected to create upward pressure on inflation.