Commerzbank’s Tatha Ghose highlights that the Central Bank of the Republic of Türkiye's (CBRT) latest survey of market participants indicates a deterioration in inflation expectations and skepticism regarding the stability of the Turkish Lira. According to the survey, market participants now forecast inflation at 29.2% for year-end 2026, compared to the CBRT's revised estimate of 28%. For the end of 2027, market forecasts stand at 23.7%, while the CBRT projects a significantly lower 15% [1].
Ghose notes that these longer-term forecasts are often passively mean reverting in the absence of concrete information, suggesting that they do not reflect strong conviction in a disinflationary trend. Regarding monetary policy, survey respondents expect the repo rate to remain at 37.0% for the time being, with a gradual decline to approximately 35% by year-end. This would imply a total easing of 500 basis points from the current effective rate of 40% [1].
On the currency front, market participants are slightly more optimistic than Commerzbank regarding the USD/TRY exchange rate for year-end, with the market forecasting 51.66 compared to Commerzbank’s 53.0. However, the one-year-ahead forecast has aligned with Commerzbank’s projection of 56.0. Overall, the convergence of these forecasts underscores limited market confidence in either sustained disinflation or a stable Lira [1].
CONCLUSION
The CBRT’s survey reveals that market participants remain unconvinced about Turkey’s disinflation trajectory and the stability of the Lira, as reflected in higher inflation forecasts and cautious expectations for interest rate cuts. This persistent skepticism suggests ongoing market uncertainty regarding the effectiveness of current monetary policy measures.