What matters on Tuesday, September 6

Inflation has continued to increase for 15 consecutive months. The Consumer Price Index (CPI) rose by 1.46% but remained below the market expectation of 2.0% in August, according to the Turkish Statistical Institute (TurkStat). While the CPI increased by 1.5 points in the last two months, the average rate of the hike slowed. 

TurkStat also said annual inflation hit 80.21% in August. Thus, it has reached its highest level since September 1998. A noticeable deceleration was observed in the TurkStat data unlike the data from the Istanbul Chamber of Commerce (ITO) and the Inflation Research Group’s (ENAG) in August. The Istanbul Wage Earners Cost of Living Index (WECLI) prepared by ITO jumped 99.91%, and ENAG’s consumer inflation hit 176.04% in August. Moreover, the difference between inflation and the policy rate of 13% rose to 67.21 points. Thus, Turkey continued to top among developing countries with the highest negative real interest rate.

The slowdown in the CPI stemmed from the monthly inflation in the food group that remained below expectations due to the decline in fresh fruits and vegetable prices as well as the negative inflation in the transportation group due to the decrease in gasoline and diesel fuel prices. On the other hand, high prices continued in the education and health groups. Annual inflation is estimated to move towards 85% in September due to the latest hike in electricity and natural gas prices and the price hike in the education group, according to analysts.

Treasury and Finance Minister Nureddin Nebati, evaluating August inflation, tweeted that many countries implement negative real interest rate policies in the fight against inflation due to the possibility of a recession. Stressing that inflation will further slow in the coming months, Nebati added: “The August inflation supports this projection. We continue to fight against inflation without stopping investment and production. We use our policies for the promotion of investment and production. Machinery and equipment investments rose by 17.8% in the second quarter, year-over-year.”

In the meantime, Turkey’s benchmark stock index ended yesterday at a record-high of 3,358.37 points, up 4.21% from last week’s close. Starting the week at 3,254.38 points, Borsa Istanbul’s BIST 100 index gained 135.63 points from Friday’s close. The index’s lowest value during the day was 3,247.88, while its daily high was 3,367.31. The total market value of the BIST 100 was around TRY 2.7tr by market close, with a daily trading volume of TRY 104.93bn. The global markets have made a negative start to the week following Russia’s indefinite gas cut to Europe while Borsa Istanbul has differentiated from them positively, according to analysts. They said 3,180 points will be the support level and 3,400 points will be the resistance level for the BIST 100 index, in technical terms.

On the foreign policy side, President Recep Tayyip Erdogan starts a 3-day Balkan tour today. Erdogan will visit Bosnia and Herzegovina, Serbia, and Croatia, respectively, according to a statement from the Communications Directorate. “During the talks, all aspects of bilateral relations will be reviewed, steps to further advance cooperation on various fields, joint infrastructure, and investment projects, in particular, will be discussed, and views will be exchanged regarding the developments in the Balkans and international matters,” the statement read. During the president’s three-day tour, business forums will be held in all three countries.


The Central Bank will release the Real Effective Exchange Rate for August (2.30 p.m.).


>> The national flag carrier Turkish Airlines will become an official sponsor of the UEFA Champions League, according to a statement from the company. As part of the agreement, Turkish Airlines’ logo will be placed on many fields and LED screens before, during, and after matches. It will also be the official sponsor of the UEFA Super Cup, UEFA Futsal Champions League, and UEFA Youth League finals.

>> The construction industry contracted by 10.9% in the second quarter, year-over-year, according to the Construction Materials Producers’ Association (IMSAD). Thus, the sector has shrunk for the fourth consecutive quarter.

>> Turkey’s chemical exports totaled USD 2.95bn in August, according to the Turkish Exporters’ Assembly (TIM). The sector grew by 42% with a total export volume of USD 22.6bn in the first eight months.


>> TRY 200 banknote constitutes 50% of the total amount of banknotes

Daily DUNYA Editorial Coordinator and Columnist Talip Aktas analyses the share of banknotes in the value and number of money in circulation in the country.

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