Türkiye's annual inflation eased moderately to nearly 48.6% in October, official data showed on Monday, continuing a downturn in the face of tight monetary policy albeit at a slower pace.

The consumer price index (CPI) advanced 48.58% year-over-year in the month, according to data from the Turkish Statistical Institute (TurkStat), hovering slightly above the market forecast.

The figure decreased for the fifth straight month from 49.38% in September to the lowest level since July 2023.

Turkish central bank began to raise interest rates last year to tackle inflation, having hiked its policy rate by 4,150 basis points in a tightening cycle between June 2023 and March this year.

The index rose 2.88% on a monthly basis, TurkStat said, slowing from September's 2.97% yet remaining above the market estimates, which foresaw an increase of 2.5% to 2.6%.

In a Reuters poll, the annual inflation rate was expected to fall to 48.2%, while the monthly figure was seen at 2.61%, mainly due to food prices. Economists surveyed by Bloomberg had expected a figure of 48.3%.

The lira traded slightly weaker at 34.35 against the dollar after the data.

The annual rate was driven by education and housing prices, while the monthly rate was driven by heavily weighted food and non-alcoholic drinks prices, up 4.33%, and clothing and shoes, up 14.32%, TurkStat said.

The central bank is closely watching monthly inflation as it continues to assess when it will begin easing monetary policy. Ahead of the CPI report, it was expected to make a first interest rate cut in December or January, having kept the policy rate at 50% since March.

Yet, most of the analysts have pushed their expectations for the first cut even later, some expecting it to occur in the first quarter of the next year.

"The smaller-than-expected fall in Turkish inflation in October ... is likely to dash any... hopes that a monetary easing cycle will start this year," said Nicholas Farr, emerging Europe economist at Capital Economics research firm.

"The risks now seem skewed towards interest rate cuts arriving even later than our current forecast of Q1 (first quarter) next year," he added.

An S&P official a day earlier placed a similar expectation while evaluating the agency's latest upgrade of Türkiye's credit rating.

The governor of the Central Bank of the Republic of Türkiye (CBRT), Fatih Karahan will later this week present the bank's last inflation report this year, where he will announce the latest expectations and developments regarding inflation, pricing and the monetary stance.

Top officials, on the other hand, anticipated the disinflation period to proceed, reiterating the target of bringing inflation down to single digits.

"Annual inflation in October fell by 26.9 points compared to May, reaching 48.6%," Treasury and Finance Minister Mehmet Şimşek said in a social media post.

"Annual price increases in core goods were 28.5%, while in services where inertia is high, they were 69.8%," he added.

"Annual increases limit the decline in inflation, especially in the rent and education groups, where backward pricing behavior is high."

The minister went on to say that "it takes time" to "remove rigidities," adding however that developments in this regard are "positive."

"The decline in 12-month inflation expectations in October to the lowest level in the last two and a half years in all sectors is important for breaking the inertia in services inflation," he said.

The minister earlier also pointed out to stickiness of services inflation citing it as an issue in general globally following the COVID-19 pandemic.

Disinflation path

Yet, the improvement on the side of inflation expectations and rise in economic confidence indices in the recent period appears to be a boost for authorities as they seek to gain on the disinflation path further.

"With the economic program we are implementing to increase social welfare, we aim to further strengthen the disinflation process in the coming period and achieve our single-digit inflation target," Vice President Cevdet Yılmaz said.

He cited that the impact of food prices "was felt in October inflation," while "there were price increases in the fresh fruit and vegetable group due to the seasonal transition."

"However, when all temporary effects are eliminated, monthly changes in core inflation indicators decreased compared to the previous month, and annual inflation levels decreased," he commented on X.

"In addition, the course of domestic producer prices shows that cost-related pressure on consumer prices is gradually easing," he added.

The domestic producer price index was up 1.29% month-on-month in October for an annual rise of 32.24%, the TurkStat data showed.

"We expect the seasonal pricing effect to decrease in the last quarter of 2024, an improvement in service inflation, and the positive course of global commodity prices to contribute to the disinflation process," Yılmaz said.