Türkiye market inflation expectations fall to nearly 4-year low
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Expectations for inflation in Türkiye in 12 months time dropped in July for market participants and businesses, while they rose for households, according to a central bank survey on Monday.
The market participants’ expectations fell by 1.2 percentage points to 23.4%, the Central Bank of the Republic of Türkiye (CBRT) said. Treasury and Finance Minister Mehmet Şimşek said that the level marked the lowest in nearly four years.
The real sector’s expectations declined by 0.8 percentage points to 39.0%. In contrast, household expectations rose by 1.5 percentage points to 54.5%.
The share of households expecting inflation to fall over the next 12 months dropped by 4.1 points to 26.6%.
Turkish annual consumer price inflation slowed to 35% in June, extending its fall from a peak of around 75% in May 2024. The central bank’s year-end inflation midpoint estimate currently stands at 24%, in a forecast range of 19% to 29%.
The CBRT has repeatedly said it closely monitors the alignment of inflation expectations and pricing behavior with its own projections. While household and business expectations remain elevated, market forecasts are more optimistic and closer to official targets.
“Inflation expectations for market participants and the real sector continued to decline compared to the previous month, while household expectations increased,” Şimşek wrote on social media platform X.
“Market participants’ expectation for inflation in 12 months time has fallen to 23.4%, the lowest level in 43 months,” he said.
Şimşek added that compared to last year, real sector and household expectations were down by 16 and 17.5 percentage points, respectively.
“With our resolutely implemented comprehensive policies, we are taking firm steps toward permanent price stability and sustainable growth,” the minister said.
On Sunday, Şimşek said the government expects inflation to end the year “within the central bank’s midpoint to high forecast range. We expect a figure below 29%.”
The central bank last week returned to its easing cycle as it cut its benchmark interest rate by a larger-than-expected 300 basis points to 43%, as disinflation continues.
Going forward, the bank said it would determine the “step size” of future monetary easing “prudently” and on a meeting-to-meeting basis. It also lowered the upper band of its rate corridor to 46% from 49%.
The bank hiked the policy rate to 46% from 42.5% in April, reversing an easing cycle that had begun in December, following market volatility over the arrest in March of Istanbul Mayor Ekrem Imamoğlu.
Imamoğlu was jailed pending trial over graft charges.
Şimşek on Sunday said the economy has returned to a “positive cycle” after market turbulence in March.
The bank said the underlying inflation trend remained flat in June and it anticipated a “temporary rise” in monthly inflation this month due to one-off factors.
Credit ratings agency Moody’s on Friday upgraded Türkiye’s rating to “Ba3” from “B1,” citing improving monetary policy credibility, easing inflation and reduced economic imbalances.
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