ANALYSIS: September Inflation Data Challenges TCMB’s Rate Cut Plans

Summary:

Turkey’s September inflation surged well above both market and institutional forecasts, weakening expectations for further monetary easing. According to analyses by İş Yatırım, Akbank, and Gedik Yatırım, sharp increases in food and clothing prices disrupted the underlying disinflation trend, prompting revisions to year-end inflation forecasts. All three institutions now expect the Central Bank of Turkey (TCMB) to pause its rate cuts in October and resume smaller steps only in December.

İş Yatırım: “Food Shock and Core Stickiness Push Expectations Higher”

İş Yatırım reported that the consumer price index (CPI) rose 3.2% month-on-month in September, exceeding both the market consensus of 2.5% and its own forecast of 2.55%. Annual inflation increased to 33.3%, marking the first uptick in 15 months.

The brokerage highlighted that food and apparel prices climbed at twice their historical averages, forcing the revision of its 2025 year-end inflation forecast to 31% from 30%. For 2026, İş Yatırım noted upward risks to its 21.5% projection.

“September’s data exceeded the upper bound of the inflation path the TCMB outlined in August,” the report warned. “This complicates expectation management and suggests that the Monetary Policy Committee should move with smaller rate cuts at its October 23 meeting.”

The firm’s core inflation indicator, based on seasonally adjusted averages, rose to 2.2% monthly, confirming that price stickiness remains strong despite tight policy.

Akbank: “Persistent Inflation Trend Narrows Policy Space”

Akbank Economic Research emphasized that the 3.23% monthly rise pushed annual inflation about one percentage point above the TCMB’s upper forecast band.
The bank stated that the persistence of core inflation leaves little room for continued easing.

“Under the current outlook, it is unlikely that year-end inflation will remain within the TCMB’s forecast range,” Akbank said. “This makes it difficult to justify further rate cuts, and the central bank is likely to pause its easing cycle in October.”

Akbank added that education, food, and transport costs rose sharply, while improvements in services and energy prices remained limited.
The bank estimated the median inflation trend at an annualized 28%, arguing that any future cuts would likely come in 100–150 basis point steps, depending on disinflation progress.

The report also underlined that while the FX channel is functioning, demand and expectation channels remain fragile, reinforcing the case for holding rates steady through year-end.

Gedik Yatırım: “Rate Cut May Be Deferred to December”

Gedik Yatırım said the high September CPI print has tempered expectations for continued rate reductions. The brokerage noted that if October inflation reaches 2.5% or higher, cumulative ten-month inflation would approach 28.5–29.0%, matching the upper band of the TCMB’s year-end forecast range.

“In this scenario, justifying another rate cut in October becomes difficult,” Gedik Yatırım observed. “A pause in October, followed by a smaller 100–150 basis point move in December, appears more likely.”

The firm pointed out that the current 40.5% policy rate yields a post-tax real return of about 33.4%, roughly matching the current annual inflation rate — supporting the case for no immediate cut.

Gedik Yatırım expects year-end CPI around 32% and the policy rate to close the year near 39–39.5%.

Overall Outlook: A Tough Final Quarter for the TCMB

September’s stronger-than-expected inflation print has significantly narrowed the TCMB’s policy room for the final quarter of 2025.

• İş Yatırım raised its year-end forecast to 31%,

• Akbank warned that inflation has moved beyond the forecast band,

• Gedik Yatırım argued that rate cuts could be delayed until December.

Markets are now focused on the October 23 MPC meeting, where Governor Fatih Karahan’s message that “monetary policy must remain tight for some time” aligns closely with the consensus view across all three institutions:
No rate cut in October, and a cautious move in December.

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