The Turkish Central Bank revised its consumer price inflation expectations to 29.61 percent by the end of this year.
The bank also revised its inflation forecast in 12 months to 23.70 percent, and 18.32 percent after 24 months.
The results of the market participants’ opinion poll for the current month of September, in which 67 representatives of the real and financial sectors participated, which were published on Friday, showed an increase in the expected increase in the consumer price index for September to 2.12 percent, compared to 2.08 percent in the last August poll.
The expected increase in the CPI by the end of the year increased from 29.43 percent in the August survey to 29.61 percent in the August survey, and increased from 23.69 percent to 23.70 percent relative to expectations after 12 months, and from 18.03 percent to 18.32 percent after 24 months.
Annual inflation in consumer prices recorded a slight decline last August, slightly less than previous expectations, while monthly inflation continued to rise in light of continued pressure on energy prices and fluctuations resulting from the Iran war.
According to data issued by the official Turkish Statistical Institute, the monthly inflation rate rose by 1.84 percent in August, slightly contradicting previous expectations, while the annual inflation rate reached 31.51 percent. Monthly inflation in July recorded an increase of 1.78 percent, while the annual rate reached 31.75 percent.
The Turkish government raised its inflation expectations at the end of this year to 28.4 percent, in an amendment that reflects the direct and indirect effects of the war with Iran on energy and commodity prices, pledging to adhere to its policies aimed at returning inflation to single digits by 2029, in parallel with accelerating economic growth to 5 percent.
Turkish Vice President Cevdet Yilmaz said, during the presentation of the government’s medium-term economic program for the period 2027-2029, last Sunday, that combating inflation took longer than expected as a result of the repercussions of the Iran war. Pointing out that the direct and indirect effects of the conflict on inflation are estimated at about 7 percent, according to Central Bank estimates.
The bank fixed, for the fifth time in a row, the one-week repurchase interest rate (repo), which is the basic standard for interest rates, at 37 percent, driven by inflation indicators and fluctuations in energy prices as a result of the Iran war.
At its sixth meeting of the current year, on Thursday, the bank’s Monetary Policy Committee kept the overnight lending interest rate at 40 percent, and the overnight borrowing interest rate at 35.5 percent, without change. The bank contradicted previous expectations by reducing interest rates by 100 basis points to 36 percent.
The committee said, in a statement after the meeting, that despite monthly fluctuations, the latest inflation figures and leading indicators indicate a decline in the general trend of inflation, and that economic activity data and the limited impact of supply shocks on local prices confirm weak domestic demand.
The statement pointed out that, on the other hand, rising energy prices resulting from geopolitical developments pose an upward risk to inflation expectations, and that the effects of these developments on inflation expectations are being closely monitored through cost, economic activity and expectations channels.
According to a survey of market participants, expectations for the base interest rate for the next meeting of the Central Bank’s Policy Committee, on October 22, fell from 37 to 36 percent, for the next meeting to 35.07 percent, and after 12 months to 29.22 percent.
Expectations of the exchange rate of the dollar against the Turkish lira at the end of the current year decreased from 51.65 to 51.57 liras to the dollar, while their expectations for the exchange rate during the next 12 months increased from 57.42 to 58.60 liras to the dollar.
Expectations for the current account deficit at the end of the year, which amounted to $50.2 billion in the previous survey period, fell to $50.1 billion, and expectations for next year also decreased from $44.444 billion to $44.368 billion.
As for growth expectations for the current year, they fell to 3 percent from 3.9 percent, while expectations for next year decreased from 4 to 3.9 percent.
Russia's central bank kept its key interest rate at 14 percent on Friday, a week before a parliamentary election that the Kremlin is closely watching as a barometer of public anxiety and public fatigue after four-and-a-half years of war in Ukraine.
The Russian economy, with a size of $2.6 trillion, witnessed a sharp slowdown over the past year, and is expected to record growth barely exceeding zero in 2026, under the pressure of a rise in the key interest rate, Western sanctions, and Ukrainian strikes targeting economic facilities, in addition to the strength of the ruble.
The decision to maintain the interest rate was in line with analysts' expectations in a Reuters poll.
The central bank said in a statement: “The economy as a whole is growing at a moderate pace in the third quarter of 2026. Current price pressures have increased significantly in recent months.”
Companies pressured the central bank to lower interest rates, arguing that borrowing for investment purposes was no longer feasible at current levels, and that growth would not regain momentum unless the key interest rate fell below 12 percent. On the other hand, the bank confirmed that investment is witnessing a recovery compared to the beginning of the year, despite interest rates remaining at their current levels.
Russia and Brazil record the highest key interest rates among the countries of the BRICS group of major developing economies, whose leaders, central bank heads and finance ministers are scheduled to meet in New Delhi this weekend.
The inflation rate rose again in June, after declining earlier in the year, following drone attacks that targeted refineries and caused fuel shortages and price jumps, which led to higher costs in various sectors of the economy due to increased transportation expenses.
The Central Bank indicated that the Ukrainian strikes that targeted refineries and e-commerce warehouses were among the main factors behind the rise in prices, describing this as “the effect of a temporary decline in production capabilities in certain sectors.”
The budget deficit, which the Central Bank considered one of the factors fueling inflation, fell to 2.5 percent of GDP in August, from 2.8 percent in the previous month, supported by the flow of dividend income from the state’s stakes in banks.
The deficit may shrink further as global oil prices return to rising and exceed the $100 per barrel barrier in light of the continuation of the US-Iranian conflict, as the Russian budget benefits, as the country is a major oil producer, from the rise in crude prices.
However, a tax mechanism aimed at protecting prices from fuel fluctuations will limit the transmission of this rise to domestic inflation rates.
With the deficit already exceeding its target level for the full year, the government chose not to resort to the expanded spending wave it followed ahead of the 2021 parliamentary elections and the 2024 presidential elections.
As for the ruble, whose strength helped the central bank curb inflation by reducing import costs, its value fell by 17 percent from its peak recorded on May 20, before it began to recover this week with the support of rising oil prices.
US stock index futures recovered on Friday with a decline in oil prices, while investors awaited consumer price inflation data, hoping that it would contribute to ending a difficult week on a positive note.
Oracle's stock jumped about 7 percent in pre-market trading, after the company's quarterly results, announced late Thursday, exceeded analysts' expectations, which strengthened investors' confidence that its investments in artificial intelligence were beginning to bear fruit. Nvidia shares also rose by 0.9 percent, according to Reuters.
Fluctuations in interest rate expectations have increased market fragility, with stocks facing a range of pressures, including escalating conflict in the Middle East and rising US Treasury bond yields.
The markets are now awaiting the Consumer Price Index report, which may in turn affect interest rate expectations, after the release of the Producer Price Index data on Thursday, which was slightly higher than expected and did not succeed in reassuring investors.
Saeed Haider, founder of Haider Capital Management, said: “We believe that the Federal Reserve needs to respond to these data in the near term, otherwise it risks repeating the wave of high inflation witnessed in the 1970s, which will represent another failure of discretionary monetary policy.”
At 5:31 a.m. EST, Dow Jones mini futures rose 276 points, or 0.53 percent, S&P 500 futures rose 40.75 points, or 0.54 percent, while Nasdaq 100 futures rose 166.75 points, or 0.57 percent.
By Thursday's close, the benchmark S&P 500 index was heading toward recording its largest weekly loss since June, while the Dow Jones Index, which includes major company stocks, was heading toward recording its largest weekly decline since March.
“Some investors are wondering how strong the market's rise this year will be,” wrote Jeff Schulz, chief investment strategist at the Franklin Templeton Institute. “But encouragingly, historical data indicates that strong starts often persist.”
According to Schulz, in the years in which the S&P 500 gained more than 10 percent by the end of August since 1950, the index continued to rise from September to December in 25 out of 28 cases.
Brent crude futures fell by more than 3 percent, but remained above the level of $104 per barrel, while West Texas Intermediate crude futures fell by 2.6 percent, but remained close to the level of $100 per barrel.
Bill Adams, chief US economist at Fifth Third Bank, said: “The sharp rise in energy prices since the beginning of the month creates new risks that push inflation higher.”
On Thursday, the average national price of diesel in the United States exceeded $6 per gallon for the first time ever, according to data from the Gas Buddy website, which specializes in tracking fuel prices.
In a separate context, the 10-year US Treasury bond yield fell by 0.16 basis points, but remained at 4.9424 percent, its highest level since 2023. High Treasury bond yields reduce the attractiveness of stocks.
Meanwhile, Adobe's stock fell by more than 3 percent in pre-market trading, after average fourth-quarter revenue expectations fell short of analysts' expectations.
ACV Auctions shares also jumped by about 44 percent, after Copart, which specializes in online vehicle auctions, agreed to acquire it in a deal worth about $1.9 billion.
