The Central Bank of the Republic of Turkey (TCMB) has published the Survey of Market Participants for the period July 2025. This survey, published on a monthly basis, contains the expectations of both the real sector and the financial sector regarding key macroeconomic indicators such as inflation, exchange rate, interest rates and growth. The July data showed remarkable changes, especially in year-end CPI and exchange rate expectations. On the interest rate front, it seems that markets are beginning to build an increasingly cautious optimism.

Gradual Retreat in Inflation Expectation

According to the July survey, the year-end CPI expectation was pulled from 29.86% to 29.66%. This, although it seems limited, can be considered a strong signal for the Central Bank's disinflation process. At the same time, the expectation of CPI after 12 months fell from 24.56% to 23.39%, while expectations after 24 months also fell from 17.35% to 17.08%.

These data indicate that the market is beginning to develop a belief that price stability can be rebuilt in the medium term. However, short-term CPI forecasts, which are still hovering close to 30%, show that inflation remains sticky and fundamental price dynamics have not yet fallen to the desired level.

Upward Revision on the Currency Front

Another point that attracted attention in the July survey was the increase in exchange rate expectations. Participants raised their year-end dollar/TL expectation to 43.7219 from 43.5731. The dollar rate, especially forecast for the 12 months after, increased from 47.0352 to 47.6972. That translates to an upward revision of about 65 cents from the previous month.

This expected increase in the exchange rate may be due to a combination of the resilient course in domestic demand, the foreign trade deficit and geopolitical risks. At the same time, the thought that the abundance of foreign exchange, which is limited by the seasonal impact of tourism revenues in the summer, will decrease in the autumn may have caused investors to raise the dollar/TL expectation.

Interest Rate Expectation: Market Optimistic But Cautious

Another prominent element in the survey is that the CMB policy rate expectation is formed at 43.29%. This rate reflects the market perception that the Central Bank could make a moderate interest rate cut in the short term, while remaining below the current policy rate (50%).

Especially in the second half of the year, the expected decline in inflation and the introduction of the base effect strengthen the expectations of interest rate cuts. However, due to the Central Bank's “data-driven” decision approach, permanent inflation decline is expected to be seen in concrete form to go to the reduction.

What Does Market Perception Say?

Financial market players have begun to rebuild their confidence in the Central Bank thanks to its policy approach over the past 12 months. This supports the trend of improvement in expectations. However, the increase in the exchange rate expectation indicates that an environment of permanent stability has not yet been fully achieved.

The fact that more than half of survey respondents have revised upward their foreign exchange expectation indicates that the pressure on the TL may continue without sustained strengthening in the foreign exchange supply. Therefore, in the coming period, the Central Bank is expected to act not only with policy interest, but with reserve management, sterilization steps and credibility policies.

Survey Participant Structure and Reliability

The Market Participant Survey of TCMB was conducted with a total of 72 participants consisting of 54 financial institutions and 18 real sector representatives. The results of the survey are evaluated by decision makers and investors as a “leading signal”.

It is known that this type of data is particularly influential in foreign investors' risk premium and portfolio decisions in Turkey. Therefore, the expectations described have the potential to influence not only the domestic market, but also international perception.

Assessment: The Transformation Process in the Economy Continues

Overall, the July survey shows that markets have strengthened their faith in the process of fighting inflation, but vulnerabilities still persist on the exchange rate side. The expectation of interest rate cuts, on the other hand, can be read as a signal that the strict monetary policy adopted by the CMB in recent times is beginning to bear fruit.

However, it should be remembered that structural reforms, fiscal discipline and confidence-building policies are particularly needed for this process to be permanent. The process of rebalancing in the economy is still ongoing, and there are opportunities as well as uncertainties.