Macro and politics

* According to the January Sectoral Inflation Expectations survey results, the decline in the 12-month ahead annual CPI expectations continued to decline, with the decrease accelerating significantly compared to the previous month. According to the January survey results, 12-month-ahead annual inflation expectations decreased by 1.7 points to 25.4% for market participants, by 3.8 points to 43.8% for the real sector, by 4.3 points to 58.8% for households. The pronounced acceleration in the downward trend of inflation expectations as of January reinforces our expectation that the CBT is likely to proceed with another 250bps reduction in interest rates in March. Our base scenario assumes that interest rate cuts could continue by 250bps in both the March and April meetings. We anticipate that the decline in annual inflation will prevail, albeit at a slower pace, in the second half of the year compared to the first half. Accordingly, we consider that after the 250bps in March and April, the pace of interest rate reductions could be moderated starting with the June meeting.