Turkish inflation data and the FED's latest interest decision...

The Fed rate decision, which we were eagerly waiting for, came earlier this week. Fed Chairman Jerome Powell's speech at the press conference moved the markets. And immediately after, TurkStat announced the inflation rate for October. Today we're going to take a closer look at both.

Last Wednesday, the U.S. Federal Reserve announced its interest rate decision after the Federal Open Market Committee (FOMC) meeting that lasted for two days. According to the decision, the Fed increased interest rates by 75 basis points for the fourth time in a row. Although this decision came in parallel with the expectation, a new sentence in the text of the decision attracted attention.

According to the new statement in the text of the decision, we see that the Fed will take into account the cumulative tightening in monetary policy, the impact of monetary policy on economic activity and inflation while determining the rate of increase in interest rates for the upcoming meetings, thus signaling a slowdown. As soon as the decision text was first published, the markets started to regard this statement positively. But things changed when Powell spoke.

As I always say, the verbal guidance in Fed Chairman Powell's speeches is at least as important as the text of the decision itself. In this respect, it is necessary to assess both the text of the decision and Powell's verbal directions together. In this meeting, Powell announced a prediction that was not in the text in his speech. According to Powell; At some point, it will be appropriate to slow the pace of rate hikes, but interest rates will be higher than previously expected. In other words, the Fed will reduce the pace of rate hikes, but we will see rate hikes longer than anticipated, and the level at which the Fed will raise rates will be at a higher point than previously anticipated.

With Powell's final verbal guidance, the positive atmosphere that formed when the decision text was first read turned into a negative one. Because Powell has clearly announced that they will raise interest rates much higher. Slowly but at a higher pace…

While the developments on the Fed side were in this direction, we followed Türkiye's inflation data internally. According to the calculations of TURKSTAT, the inflation data for October was 3.54% monthly, in line with market expectations, while it was 85.51% annually. Food inflation, which concerns households the most, rose to 99.05% annually.

According to TUIK data, the highest annual increase was in the transportation group with 117.15%. This group mainly bears the effects of the recent increase in fuel prices and it seems that it will continue to have an impact on general inflation for the next few months until the strong base effect kicks in.

When the CPI data reached the highest figure of the last 24 years as 85.51%, an old but timeless question came up again. When will inflation fall? If we answer this question with an optimistic estimation, we can say that we will have to wait for next December for January or February next year with a more cautious approach.