Market Expectations: Changes Observed in Inflation and Interest Rate Forecasts

Update on Inflation Forecasts of Market Participants

The Market Participants Survey conducted by the Central Bank of the Republic of Turkey (CBRT) revealed significant changes in November. The participants' current forecast for the consumer price index (CPI) has decreased from 2.34% to 1.59%, indicating a relief in short-term inflationary pressures.

Year-End Inflation Expectations Increased

On the other hand, the year-end inflation expectation has shown a notable increase, rising from 31.77% to 32.20%. This situation indicates that market participants have adopted a more pessimistic outlook regarding inflation. Additionally, the CPI forecast for next year-end has increased from 22.13% to 23.21%, signaling a rise in long-term inflation expectations.

Where Are Expectations for Exchange Rates Going?

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 the pressure on the local currency continues.

Predictions Regarding Central Bank's Interest Rate Policy

As for interest rate forecasts, participants expect the Central Bank's policy rate to be 38.28% in the first meeting, 37.11% in the second meeting, and 35.81% in the third meeting. Additionally, the expected interest rate for 12 months later is 29.32%, while 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 has increased to 3.35%, and for the next year, it has risen to 3.77%, indicating signs of a revival in economic activity. The overnight interest rate in the BIST Repo-Reverse Repo Market was recorded at 39.35% in November, and the current account balance is expected to show a deficit of -20.91 billion dollars by year-end.