Published on Monday, October 5, 2026

Türkiye | A better inflation print but not yet comfortable

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Consumer inflation came in at 1.84% m/m, below our forecast (2.3%) and consensus (2.2%), bringing annual inflation down to 29.7%, also on base effects. Energy outlook poses upside risks, while weaker demand provides some offset. We keep our 30% year-end inflation forecast, with slight downside risk after the latest print.

Key points

Key points:
The downside surprise in headline inflation was driven by food, transportation and communication prices. According to our calculations, seasonally adjusted (s.a.) monthly inflation eased to 1.6% (from 2.3%), driven by food, alcohol & tobacco and services.
Core C inflation (s.a.) edged down to 1.67% m/m (vs. prev. 1.8%), supported by services inflation (1.85% m/m vs. prev. 2.58%), while basic goods inflation (s.a) rose to 1.4% m/m on the back of clothing and durable goods inflation.
Diffusion and trend indicators point to only limited improvement, with the average of six trend indicators edging down to 1.74% m/m and median inflation unchanged at 1.74%. Still, the 3-month average underlying trend has stayed below 2% since July, suggesting that weak demand and favorable food inflation have helped contain second-round effects.
October inflation could edge slightly above 2% m/m on seasonal factors, while annual inflation may decline further to 29-29.5%. Producer prices excluding food point to cost pressures, while elevated inflation expectations and uncertainty around the Middle East conflict warrant caution.
Weaker activity and downside risks to demand from the recent fund shock have increased the likelihood of an October rate cut. However, upside risks to energy outlook, higher global rates and elevated inflation expectations call for a prudent stance. We maintain our 30% year-end forecast despite limited downside risks, given uncertainty around food and energy.