August CPI turned out to be much softer than expected:
* -0.3%m/m vs 0.1% expected and 0.3% in July
* 5.3%y/y vs 5.8% expected and 5.4% in July
Headline CPI dominates CBT policy making in our opinion and therefore August figures pave the way for another 50bp rate cut in September. PPI was higher than expected (0.4%m/m vs 0.2% expected) but the year-on-year growth rate remained in negative terrain (-1.0%), which means that cost-push inflation is absent at the moment. Coupled with the relatively solid TRY and the benchmark bond yield trading at around 9.7%, the CBT will probably feel vindicated in its aggressive easing stance. (1630 GBp, -0,43%) policy meeting is on 17-Sep and we see room for a 50bp rate cut. The ISE-100 index has lost some ground since late August, but the prospect of more rate cuts could lift market sentiment and push the index towards 47k.