Macro and Politics

*The CBT will unveil the 1^sth Quarterly Inflation Report of the year @10:30 local time. Today’s report will shed light on the Bank's future monetary policy, inflation and output expectations. Between 10:30 am - 11:00 am, Governor Fatih Karahan will present the Inflation Report, followed by a Q&A session from 11:00 am - 11:30 am. As a reminder, during the November 8th Inflation Report presentation, the 2025 inflation forecast, initially set at 14%, was revised upwards to a range of 16% to 26%, with a midpoint of 21%. Given that the upper bound of 26% aligns with market expectations, and the inflation data released since the report is consistent with the CBT's projections, we do not expect any revisions to the forecast in today’s presentation. Furthermore, based on the Inflation Forecasts graph from the November report, we had inferred that the CBT’s January inflation projection lies between 4.4% and 5.38%. Therefore, while January inflation realizations surpassed median estimates, it remains consistent with the CBT's projections. In this context, after the inflation data for December and January, we do not foresee any changes to the inflation projections today. However, we anticipate a greater likelihood of upward revisions to inflation expectations in subsequent Inflation Report presentations later this year. The CBT Governor Karahan’s assessments on monetary policy and inflation outlook as well as the Q&A session will be closely scrutinized today.

* During the week of January 24 – 31, the equity market experienced a modest foreign inflow of USD89.1mn, while foreign investors emerged as net sellers in the bond market (excluding repo transactions) with a net outflow of USD682.8mn, reversing the trend of four consecutive weeks of inflows. Accordingly, the foreigners’ share in the total bond stock retreated merely from 8.7% to 8.6%. On an annual basis, the equity market recorded a cumulative foreign outflow of USD2.7bn, whereas the bond market (excluding repo transactions) saw a cumulative foreign inflow of USD17.5bn. Besides, the residents’ FX deposits decreased by USD1.2bn (gold accounts excluded, EUR/USD parity adjusted) in the period of January 24 – 31, while the residents’ total FX deposits (including gold, price adjusted) slid by USD1.2bn. The CBT’s gross FX reserves dropped by USD1.6bn to USD166.1bn, while net international reserves decreased by USD2bn to USD71.7bn. Net reserves excluding swaps, moreover, rose by USD2.3bn to USD65.2bn.