Commerzbank’s Tatha Ghose has highlighted persistent inflationary pressures in Turkey, noting that seasonally-adjusted price momentum remains above 2% month-on-month, making disinflation highly unlikely in the medium term [1]. Market participants have raised their year-end Consumer Price Index (CPI) expectations to 29.5% year-on-year, which is higher than the Central Bank of the Republic of Türkiye's (CBRT) official forecast of 28% [1]. Ghose criticizes the CBRT for repeatedly adjusting its forecasts to match those of private forecasters, arguing that this undermines the central bank's credibility and its ability to anchor inflation expectations [1].
The CBRT's own seasonally-adjusted July estimate showed headline CPI rising by 2.3% month-on-month, with services prices increasing by 2.9% month-on-month, rates that are incompatible with the central bank's medium-term targets [1]. As a result of these persistent inflationary pressures and credibility concerns, the Turkish Lira (TRY) has recently broken through the 48.10 level against the US Dollar (USD) and is expected to remain under pressure [1].
Ghose warns that if private forecasters continue to move first and the CBRT only catches up during scheduled Inflation Report rounds, the market may begin to treat official inflation reports and mid-term plans as mere presentation documents rather than genuine forecasting tools [1]. This dynamic is seen as detrimental to the CBRT's role in anchoring market expectations and maintaining monetary stability [1].
CONCLUSION
The Turkish Lira is facing significant downward pressure as inflation expectations among market participants outpace the CBRT's official forecasts. Persistent high monthly inflation and concerns over central bank credibility are undermining confidence in the lira and Turkey's monetary policy outlook. Unless the CBRT regains control over inflation expectations, market volatility is likely to persist.