MNI CBRT Preview - Sept'26: Inflation Risks Remain

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Executive summary:

• The CBRT is widely expected to leave the one-week repo rate unchanged at 37% at its September meeting, having already effectively reduced borrowing costs by 300bps between meetings.
• While Turkey’s headline and monthly CPI inflation came in slightly below expectations in August, the core measure ticked higher.
• With upside risks remaining from elevated oil prices, persistent food price pressures and seasonal increases in education costs, policymakers are likely to maintain a cautious stance.

Since the previous meeting, the CBRT has resumed one-week repo auctions, effectively loosening financial conditions by 300bps without a formal rate cut. Prior to this, liquidity had been channelled through the overnight lending facility at the higher 40% rate. Against this backdrop, the Bank has room to remain on hold for and assess before making further adjustments.

August inflation data were broadly in line with expectations. Consumer prices rose 1.84% M/M, slightly below the 1.92% consensus (Prior: 1.78%), bringing annual inflation down to 31.5% Y/Y (Est: 31.6%; Prior: 31.8%). This marks a modest continuation of the disinflation trend, with annual inflation easing for a third consecutive month. However, the underlying inflation picture remains less reassuring. The closely watched Core C measure – CPI excluding energy, food and non-alcoholic beverages, alcoholic beverages, tobacco and gold – rose 1.81% M/M in August, pushing annual Core C slightly higher to 30.07% from 29.91% in July.