by Burak Akinci
ANKARA, Oct. 14 (Xinhua) -- Türkiye is likely to postpone monetary easing until early next year due to higher-than-expected inflation in September, experts have said, predicting a prolonged wait for an interest rate cut that will challenge an already slowing economy.
Türkiye's annual inflation slowed less than expected in September to 49.4 percent, official data showed early October, a figure which analysts said could disappoint central bank officials after a series of interest rate hikes.
"In month-on-month terms, inflation is still significant," Senol Babuscu, a professor of finance from Ankara's Baskent University, told Xinhua, noting that price growth for September climbed to 2.97 percent, and prices for housing rose almost 98 percent on an annual basis.
Despite that inflation would fall further over the coming months, the government's end-year forecast of 41.5 percent, revised up from 33 percent at the beginning of the year, is expected to be surpassed, he said.
Therefore, a rate cut predicted previously by most analysts and banking institutions for November or December is not forthcoming, the expert said. "Early 2025 seems a more appropriate time."
The central bank's next rate decision is scheduled for Thursday, and observers believe that monetary policy will remain unchanged.
According to a survey conducted by semi-official Anadolu news agency with 16 economists and published on Monday, all participants said the central bank will maintain its benchmark interest rate at 50 percent this Thursday.
The Turkish central bank has maintained a tight monetary policy throughout 2024, holding interest rates at 50 percent for six months now.
Inflation reached 75 percent in May this year but started to fall in June and it's been on a downward path since amid improvement signs in the economy.
Furthermore, Ankara has received credit upgrades from global rating agencies this year, leading to an improved investment image that policymakers wanted to establish to attract foreign investments.
From the view of Mustafa Sonmez, an Istanbul-based independent economist, the slowdown in annual inflation is basically due to a base effect, "because it was very high in 2023."
"The economic growth in Türkiye has slowed to its weakest level since the COVID-19 outbreak as high interest rates take their toll on companies and individuals," Sonmez told Xinhua.
According to economists, high borrowing costs create a more challenging financial environment for companies, discouraging expansion and innovation, while squeezing profit margins and increasing financial risk.
While a crucial tool in the fight against inflation, high interest rates have also dented gross domestic product (GDP) growth in Türkiye.
Second-quarter growth turned out to be 2.5 percent on a year-on-year basis, official data revealed on Oct. 2.
The figure slowed from a 5.3 percent growth in the first quarter and fell below market expectations, according to the semi-official Anadolu Agency.
Economists believe that slowing down the overheated economy will be a key move in reducing inflation to the central bank's single-digit target over the next few years.
Hakan Kara, a former chief economist at the central bank, said on social media platfrom X that the coming months are expected to be challenging, as businesses face high interest rates and slower growth, in contrast to the recent years when easy-money policies fueled economic expansion. ■
