Key Moments
- Market-based inflation expectations for Turkey for year-end 2026 and the next 12 months have increased again, weakening confidence in the disinflation narrative.
- Survey participants anticipate the CBRT will hold its policy rate at 37.0% at the upcoming meeting, then lower it to 34.7% by year-end.
- The same survey raised the end-2026 USD/TRY forecast to 51.55, a level that Commerzbank fears could ultimately be exceeded.
CBRT Expectations Seen as Negative for TRY
Tatha Ghose at Commerzbank reports that Turkey’s market-based inflation expectations for 2026 and for the next 12 months have moved higher again. He argues that this shift erodes confidence in the country’s disinflation process and creates an unfavorable backdrop for the Turkish lira (TRY), particularly in light of underlying monthly inflation that he estimates is close to 2%.
According to the commentary, survey participants expect the Central Bank of the Republic of Türkiye (CBRT) to keep its key policy rate unchanged at 37.0% at this week’s rate-setting meeting, followed by a reduction to 34.7% by the end of the year. Ghose characterizes this expected path for interest rates as negative for the lira given the current inflation dynamics and the higher projected USD/TRY level at the end of 2026.
Details from the Latest CBRT Market Survey
Ghose notes that the CBRT released its most recent survey of market participants, and he interprets the results as discouraging for the inflation outlook and the currency. He highlights that expectations for consumer price inflation (CPI) at the end of 2026, the 12-month horizon, and the 24-month horizon show a mixed pattern, with the shorter-term measures moving higher.
| Survey Metric | July Reading | June Reading | Comment |
|---|---|---|---|
| Year-end 2026 CPI forecast | 29.2% y/y | 29.1% y/y | Continues the steady rise seen since the start of the year |
| 12-month ahead CPI expectation | 23.95% | – | Increased compared with the prior survey |
| 24-month ahead CPI expectation | 17.8% | – | Described as a theoretical, mean-reverting estimate with limited relevance |
| Policy rate expectation – near term | 37.0% | – | Participants see the rate unchanged at this week’s meeting |
| Policy rate expectation – year-end | 34.7% | – | Reflects an anticipated rate cut by year-end |
| End-2026 USD/TRY forecast | 51.55 | – | Survey projection that Commerzbank fears could be surpassed |
Near-Term Inflation Views Deteriorate
“Turkey’s central bank (CBRT) published its latest survey of market participants yesterday, and the message was not encouraging. The year-end 2026 CPI forecast edged up to 29.2% y/y in July from 29.1% y/y in June, extending the steady rise since the beginning of the year. The 12-month ahead expectation also increased, to 23.95%, while only the 24-month forecast softened, to 17.8% (we treat this latter as a lazily mean-reverting theoretical forecast with little link with present reality).”
“The relevant point is that near-term expectations have begun to rise again. And this was not limited to just the period after the Iran war. This means that the market does not share policymakers’ stated message that disinflation is proceeding in a sufficiently convincing manner.”
“It also means that fresh shocks – whether from oil, the lira or domestic politics – are feeding into expectations rather than being looked through.”
Rate Path and Currency Implications
“Rate expectations also tell an uncomfortable story. Participants expect CBRT to keep the policy rate unchanged at 37.0% at this week’s rate meeting, but then cut it to 34.7% by year-end (the odd number is from survey averaging). This would precisely be the wrong combination for the lira if underlying inflation momentum were to remain close to 2% m/m, as we think it will.”
“The same survey lifted the end-2026 USD/TRY forecast to 51.55. But we fear that it can end up higher.”
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