September Inflation Rates Decline: Turkish Lira Shows Signs of Strength
In a significant economic update, the Turkish Lira experienced a slight increase during early trading on Thursday, maintaining its position within a limited range around the 34.20 mark throughout the week. This modest rise can be attributed to the recent inflation data released in Turkey, which indicated a decrease in the annual inflation rate for September, falling below 50% for the first time since 2021.
According to the Turkish Statistical Institute, the inflation rate for September was recorded at 49.38%, down from 51.97% in August. This decline has shifted real interest rates—calculated by subtracting the inflation rate from the nominal interest rates offered by banks—into positive territory, a notable development for the Turkish economy.
The report highlighted that housing prices surged by 97.87% and education costs rose by 93.59% year-on-year, marking the highest increases. Conversely, transportation prices saw a more modest increase of 26.60%, while clothing and footwear prices rose by 30.70% annually. On a monthly basis, the consumer price index increased by 2.97% in September, primarily driven by a 14.21% rise in education prices.
This decline in inflation rates is expected to pave the way for potential interest rate cuts by the Turkish Central Bank by the end of the year. Previous reports suggested that the Central Bank anticipated inflation to decrease to 39% by year-end, while a Reuters poll projected a decline to 43% by December. This scenario opens the door for the Central Bank to implement its first interest rate cut, currently set at 50%, after maintaining it unchanged for six consecutive months as of September.
From a technical analysis perspective, the USD/TRY pair showed a slight decline, trading at 34.16 at the time of this report, down from 34.21 at yesterday's close. The pair has been moving within an ascending price channel on the daily time frame, indicating a prevailing upward trend, supported by its position above the 50 and 200 moving averages on the four-hour and daily time frames. Additionally, the pair is forming a rising wedge pattern on a smaller time frame, suggesting potential for further increases if it breaches the upper limit of this pattern.
Traders should note that any decline in the dollar's price presents a buying opportunity for the Turkish Lira, as forecasts indicate a potential rise in the pair if it closes above the specified rectangle range.
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