Market Expectations: Changes Observed in Inflation and Interest Rate Predictions

Market Participants' Inflation Forecasts Updated

The Market Participants Survey conducted by the Central Bank of the Republic of Turkey (CBRT) revealed significant changes in November. Participants' current period consumer price index (CPI) estimate decreased from 2.34% to 1.59%, indicating that inflationary pressures have eased in the short term.

Year-End Inflation Expectation Increased

The year-end inflation expectation, however, saw a notable increase, rising from 31.77% to 32.20%. This situation shows that market participants have adopted a more pessimistic outlook regarding inflation. Additionally, the CPI forecast for the end of next year also increased from 22.13% to 23.21%, indicating a rise in long-term inflation expectations.

What Are the Expectations for Exchange Rates?

In the foreign exchange market, the Dollar/TL expectation for November was set at 42.6691, while the year-end forecast settled at 43.4245. This indicates that pressure on the local currency continues.

Central Bank's Interest Rate Policy Predictions

Regarding interest rate forecasts, participants expect the Central Bank's policy rate to be 38.28% for the first meeting, 37.11% for the second meeting, and 35.81% for the third meeting. Furthermore, the expected interest rate for 12 months later is 29.32%, and the forecast for 24 months ahead is set at 20.96%.

Economic Growth Expectations on the Rise

Economic growth expectations are also showing an upward trend. The year-end GDP growth expectation increased to 3.35%, and for the coming year, it rose to 3.77%, signaling signs of a revival in economic activity. The overnight interest rate recorded in the BIST Repo-Reverse Repo Market in November was 39.35%, and the year-end forecast for the current account balance was announced as a deficit of -20.91 billion dollars.