Resilient Turkish inflation tempers rate cut expectations
September CPI at 2.97%, above forecast of 2.2%
Cenbank chief: 'Some distance to cover' in inflation fight
Some expectations for first rate cut moving to next year
Housing, education prices rise nearly 100% year-on-year
Adds central bank governor saying still 'some distance to cover', JPMorgan forecast
By Nevzat Devranoglu and Daren Butler
ISTANBUL, Oct 3 (Reuters) -Turkey's annual inflation fell to 49.38% in September whereas the monthly rate was much higher than expected at nearly 3%, prompting a note of caution from the central bank and setting the stage for later than expected interest rate cuts.
At 50%, the central bank's policy rate is now higher than the annual consumer price index (CPI) for the first time since 2021, marking a milestone in an aggressive tightening cycle meant to correct years of easy money and soaring prices.
But after the surprisingly high price measures last month, boosted in part by education-related costs, Central Bank Governor Fatih Karahan said there remains "some distance to cover" before achieving the bank's two main inflation goals.
Addressing parliament after the data was released on Thursday, Karahan said the two conditions were: a significant and permanent decrease in the main trend of monthly inflation, and the convergence of expectations to the bank's own forecast range.
The lira TRYTOM=D3 was slightly firmer at 34.18 against the dollar.
Some analysts said the bank was unlikely to be able to ease policy until December at the earliest and perhaps not until next year.
Wall Street bank JPMorgan said it expected easing to begin in January, after having earlier predicted November. Capital Economics said a rate cut this year looks "very unlikely".
Month-on-month inflation was 2.97%, according to the Turkish Statistical Institute, above a Reuters poll forecast of 2.2%. Annual CPI was also higher than the poll forecast of 48.3%.
In August, monthly CPI was 2.47%, with the annual rate at 51.97%. The central bank is closely watching the monthly rate for signals of when to begin easing, though it has only dipped below 2% once this year, in June.
Last month, a Reuters poll showed a growing minority of analysts expecting a first cut next year, with the consensus settled around November and expectations of at least 20 points of easing by the end of 2025.
More hawkish shifts could come.
Haluk Burumcekci, founding partner at Burumcekci Consulting, said an imminent cut is unlikely. Even if October inflation is in line with the central bank's guidance, he said, "it may not be sufficient" for a November cut.
TIGHT POLICY
The domestic producer price index was up 1.37% month-on-month in September for an annual rise of 33.09%, the data showed.
Annual inflation in September was driven by a 97.9% rise in housing prices, with education prices soaring 93.59%. Prices of the key food and non-alcoholic drinks rose 43.72%, below the overall level.
Last month the central bank held rates steady at 50% for a sixth straight month, saying it remained highly attentive to inflation risks. But it removed a reference to potential tightening, seen as a first signal that easing would eventually come.
Karahan said the central bank would maintain its tight stance decisively until price stability is achieved.
Separate central bank data released last week showed that households' expectations of annual inflation 12 months ahead was 71.6% in September, well above market expectations of 27.5%.
The bank, which has hiked rates by 4,150 basis points since June last year, sees inflation falling to 38% at the end of this year and 14% next. The government sees inflation at 41.5% at the end of this year.
Reporting by Canan Sevgili, Nevzat Devranoglu, Daren Butler; Editing by Jonathan Spicer, Mark Potter and Susan Fenton
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