Inflation forecasts ease slightly in Türkiye, with no rate cut expected

Inflation expectations in Türkiye improved slightly in June following better-than-expected inflation data for May, as the Central Bank’s survey of market participants showed year-end inflation projections easing to 29.86%.

Alongside the softer inflation outlook, participants now expect the Bank to hold interest rates at 46% at its next meeting.

The expected monthly Consumer Price Index (CPI) rise for June also declined from 1.77% to 1.61%.

The survey, conducted between June 10 and 12 and based on responses from 69 participants across the real sector, financial institutions, and independent professionals, reflects a slight improvement in sentiment regarding Türkiye’s inflation outlook.

The 12-month inflation forecast declined from 25.06% to 24.56%, while the two-year projection fell from 17.77% to 17.35%.

Line and bar charts illustrate Türkiye’s annual inflation expectations as of June 2025, based on the Central Bank’s market participants survey. The visuals show end-of-2025 projections easing to 29.86%, while 12-month and 24-month-ahead forecasts continue to decline, reaching 24.56% and 17.35%, respectively. Data accessed on June 16, 2025. (Chart via CBRT)

Policy rate seen steady in the short term

Participants broadly expect the CBRT to maintain its policy rate at 46% at its next meeting on Thursday.

However, a downward trend is anticipated in the following months, with projections falling to 43% at the second meeting and 40.38% at the third.

The 12-month-ahead policy rate forecast stands at 29.31%, indicating expectations of a gradual easing cycle over the next year as inflation pressures moderate.

Charts display market expectations for Türkiye’s interest rates, with the CBRT policy rate projected to remain at 46.0% in the near term before gradually falling to 20.1% by mid-2027. The BIST overnight repo rate remains relatively stable around 50%, accessed on June 16, 2025. (Chart via CBRT)

Exchange rate and current account projections remain mixed

Expectations for the USD/TRY exchange rate at the end of the year edged lower from 43.6984 to 43.5731. However, projections for 12 months ahead suggest a gradual weakening of the Turkish lira, with the forecast rising to 47.0352 from 46.6185.

Meanwhile, Türkiye’s current account deficit—a key indicator of the country’s external balance—is now expected to reach $18.8 billion by the end of the year, improving slightly from last month’s $19.2 billion estimate.

The deficit forecast for 2026 has also been revised downward, from $23.8 billion to $23.0 billion.

GDP growth forecasts hold firm

In contrast to shifting monetary expectations, Türkiye’s growth outlook remains unchanged.

Bar charts show market participants’ expectations for Türkiye’s GDP growth, with the 2025 forecast gradually declining to 2.9% and the 2026 projection holding steady at 3.7% as of June 2025, accessed on June 16, 2025. (Chart via CBRT)

The economy is projected to grow by 2.9% in 2025, with an expected acceleration to 3.7% in 2026.

This suggests that despite ongoing macroeconomic volatility, participants foresee a stable expansion path for the Turkish economy.

June 16, 2025 04:51 PM GMT+03:00