Key Moments
- CBRT survey participants raised inflation projections, with expectations for 2026 and 2027 exceeding the central bank’s own revised forecasts.
- Respondents anticipated the repo rate at 37.0% in the near term, easing to around 35% by year-end from an effective level of 40%.
- Market forecasts for USD/TRY at year-end were stronger than Commerzbank’s view, but one-year-ahead projections aligned with Commerzbank’s 56.0 estimate, signaling limited faith in lasting Lira stability.
Survey Data Points to Deteriorating Inflation Sentiment
Commerzbank analyst Tatha Ghose highlighted that the Central Bank of the Republic of Türkiye’s (CBRT) latest market participants survey reflected a further deterioration in inflation expectations. According to the survey, respondents now see inflation at 29.2% by the end of 2026, compared with the CBRT’s newly revised projection of 28%. For the end of 2027, market participants forecast inflation at 23.7%, well above the CBRT’s 15% estimate.
Ghose noted that these survey outcomes followed Commerzbank’s earlier reservations about the inflation report projections and the broader outlook for the Turkish Lira. The analyst emphasized that the longer-dated expectations should not be interpreted as firm conviction about disinflation, stating: “We describe the longer-term forecast as often passively mean reverting, in the absence of concrete information, not really a high conviction view about disinflation.”
Interest Rate Expectations: Gradual Easing From Elevated Levels
On the policy rate trajectory, the survey indicated that participants foresee the CBRT’s repo rate remaining at 37.0% in the near term, before moderating to around 35% by year-end. Ghose pointed out that such a profile would correspond to 500 basis points of easing relative to the current effective rate of 40%.
| Indicator | Market Survey | CBRT Projection | Commerzbank View (where stated) |
|---|---|---|---|
| Inflation – end-2026 | 29.2% | 28% | – |
| Inflation – end-2027 | 23.7% | 15% | – |
| Repo rate – near term level | 37.0% | – | – |
| Repo rate – year-end level | c.35% | – | – |
| Effective policy rate (current) | – | – | 40% |
| USD/TRY – year-end | 51.66 | – | 53.0 |
| USD/TRY – one-year ahead | 56.0 | – | 56.0 |
Lira Projections Highlight Skepticism on FX Stability
In currency markets, Ghose observed that survey respondents were “more optimistic than us about USD/TRY for year-end (market: 51.66; us: 53.0).” However, the one-year-ahead forecast for the pair matched Commerzbank’s own 56.0 projection. This convergence, according to Ghose, reinforces the view that investors are not convinced about a durable improvement in either the disinflation narrative or the Lira’s stability.
Summarizing the implications of the CBRT survey, Ghose stated: “Respondents are more optimistic than us about USD/TRY for year-end (market: 51.66; us: 53.0), but the one-year ahead forecast has caught up with our own 56.0. In summary, the market does not have much confidence in the disinflation or stable exchange rate story.”
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