Macro and Politics

* TURKSTAT will release September inflation figures today at 10:00 local time. We forecast CPI inflation at 2.1% m/m in September, which would bring annual inflation down to 30.1% from 31.5%. The market median stands slightly above our forecast at 2.2% m/m. We expect favorable base effects to bring annual inflation close to 30% in September, with the disinflation trend likely to continue through the final quarter. We maintain our 2026 year-end inflation forecast at 28%. However, continued tensions in the US–Iran war and persistently elevated Brent crude prices are sustaining inflationary pressures through the energy channel, leaving the risks to our forecast increasingly skewed to the upside. We believe the decline in annual inflation we project for September, coupled with signs of cooling domestic demand, should create room for a rate cut at the October meeting. Accordingly, we expect the MPC to deliver 100bp cuts in both October and December, bringing the policy rate to 35% by year-end. Yet, should the inflation outlook fail to improve to the extent we envisage, the scope for rate cuts could prove more limited than currently anticipated.

* The Treasury will hold auctions of 2y and 5y fixed-coupon bonds today, alongside direct sales of a 2y gold bond, a 2y gold-backed lease certificate and a 2y TLREFK-indexed lease certificate. According to three-month (Oct–Dec 2026) domestic borrowing strategy, the Treasury plans to raise a total of TL414.8bn from the domestic market in October through four auctions and four direct sales, against TL436.6bn of redemptions. Following today’s auctions and direct sales, the Treasury will complete its October domestic borrowing program tomorrow with auctions of a 4y TLREF-indexed bond and an 8y fixed-coupon bond, alongside the direct sale of a 1y USD-denominated bond.