Macro and Politics

* TURKSTAT will release the September inflation figures today @ 10:00 local time. We forecast a monthly CPI increase of 2.47% for September, which would bring the annual inflation rate down from 33% to 32.3%. According to the survey conducted by ForInvest, the market consensus estimates a 2.5% m/m CPI rise, in line with our house estimate. We do not expect a rate cut exceeding 250bps in the last two MPC meetings of the year, as we also anticipate that September-level inflation is likely to persist into October, which could increase the probability that the CBT may implement rate cuts at a slower pace than market expectations. Consequently, the upcoming inflation releases will be closely monitored in terms of market perception. Subsequently, we expect monthly CPI growth to decelerate more rapidly in November and December, with a potential monthly increase below 1% in December. Our year-end CPI forecast stands at 29.7%.

* Foreign investors were net buyers through standard portfolio channels in the week of September 19 – 26, recording net inflows of USD158.8mn into the equity market and USD415.7mn into the bond market (excluding repo transactions). The foreign share in the total government bond stock increased from 6.6% to 6.8%. Moreover, during the week of September 19 – 26, the residents’ FX deposits slumped by USD1.8bn (excluding gold accounts and adjusted for the EUR/USD parity effect), while their total FX deposits (including gold, price adjusted) tumbled by USD1.2bn during the week of September 19 – 26. In terms of official reserves, the CBT’s gross FX reserves increased by USD4.1bn to USD183.1bn and net international reserves rose by USD2.3bn to USD72.7bn, while net reserves excluding swaps climbed by USD4.1bn to USD57.1bn.