Disinflation snags in October on tax, oil and the risk premium

Three costs land in the same week

The first week of October brings Türkiye three separate bills, and all three press in the same direction, on prices and on the cost of financing. The first is tax. According to a Gzt report of 27 September, the sliding-scale mechanism, which adjusts fuel taxes to the oil price, ends completely on 1 October. The same report says that, unless the arrangement changes, the ÖTV and VAT effect could add about 12.48 lira to a litre of petrol. This figure is an industry estimate, not an official decision; the exact amount could not be verified.

The second is energy. Brent futures topped $106 in Asian trading on 28 September and traded at $105.84 in Trading Economics data, up 1.46% on the day. The price has risen 16.96% in a month. The third is the risk premium. Türkiye's 5-year CDS, the annual cost of insuring the country's debt against default, rose above 250 basis points on 25 September for the first time since 27 May. In the same week the fund investigation widened with the detention of two senior Tera executives on 27 September.

The tax channel: from pump prices to CPI

The sliding-scale mechanism was a buffer that kept pump prices stable by lowering the fixed ÖTV when oil became more expensive. Removing it creates pressure to restore the tax to its former level at a time when Brent is around $106. According to Sanayi Gazetesi data for 28 September, petrol costs 80.40 lira and diesel 93.50 lira on Istanbul's European side. According to Gzt, the stepped ÖTV on diesel will also rise from 3 to 6 lira per litre on 1 October.

Pump prices are already volatile. Diesel saw a cut of about 5.57 lira on 24 September and an increase of 2.55 lira the next day. Energy costs are also building up on the producer side. According to TurkStat data, domestic producer prices rose 32.60% year on year in August, and the energy component rose 106.24%. On 26 September Vice President Cevdet Yılmaz put the war's effect on inflation at about 7 points, citing the CBRT's estimate. The tax increase is a separate item that will come on top of those 7 points. It cannot be explained as an external shock; it is a direct policy choice.

The market has begun to price this picture into the bond curve. According to Investing.com data, the 10-year benchmark yield closed at 32.77% on 25 September, about 19 basis points above the 32.58% of 18 September. In a speech reported by the newspaper Dünya, Yılmaz had said that without the war, year-end inflation would have been around 21–22%. The rise in the long-dated yield over a single week shows the market has not yet accepted this optimistic path. The tax adjustment in October may widen this gap rather than close it.

The risk premium channel: the fund investigation and political noise

The scale of the fund crisis is large. According to Turkish Minute, the 131 funds placed into liquidation by the SPK hold about 18.3 billion dollars in assets and 455,758 investors. On 26 September the Justice Minister announced that the assets of 46 legal entities, 18 funds and 42 individuals had been frozen. Sources conflict on the number held in custody: BirGün gives 51 people, Hürriyet 45. As of the morning of 28 September it could not be verified whether the two Tera executives had been formally arrested.

The move in CDS coincides with these weeks. In Investing.com data the premium stood at 223.02 basis points on 11 September, 232.80 on 18 September and 245.17 on 24 September. Political noise is also feeding risk perceptions. A journalist who shared a claim that a minister would resign was arrested on 26 September, while the Ministry of Treasury and Finance had denied resignation claims on 24 September. These events alone would not be expected to change credit risk. But because they are unfolding while the credibility of the financial system is being questioned, they are pushing up the extra yield that foreign investors demand.

The CBRT's constraint is reserves, not rates

According to CBRT data released on 24 September, net reserves fell by 6.41 billion dollars in the 18 September week to 55.84 billion dollars, and net reserves excluding swaps fell to 43.1 billion dollars. Gross reserves, at 174.4 billion dollars, are at their lowest since early August; the four-week loss is about 14 billion dollars. The dollar stood at 48.97 lira on 25 September. How much of the reserve loss came directly from foreign currency sales has not been disclosed; this breakdown could not be verified.

The policy rate is held at 37%. Raising rates would squeeze the real economy further at a time when the OECD has cut its 2026 growth forecast to 2.7%. Holding rates and defending the lira with reserves, on the other hand, produces a measurable cost every week. The fiscal side is not flexible either: central government debt rose to 15.89 trillion lira in August, and 51% of it is denominated in foreign currency. Every rise in the exchange rate therefore also enlarges the debt burden. Ending the sliding-scale mechanism brings revenue to the budget, but the same step may lengthen the CBRT's reserve spending by raising inflation. The first week of October will be the week this balance is tested.

What to watch and what remains uncertain

Three data points will test this reading. The first is whether a new decision on fuel ÖTV is taken before 1 October; according to Gzt, such a decision could change the amount. The second is whether the weekly reserve data due on 1 October show net reserves falling by more than 5 billion dollars again. The third is whether CDS settles above 250 basis points. The uncertainties are these: the tax effect of 12.48 lira is not official; the 25 September CDS close was missing from the sources accessed tonight; and sources conflict on the number held in custody. Developments in oil supply were kept outside the scope of this report.