Macro and Politics

* According to the results of the February Sectoral Inflation Expectations survey, inflation expectations for the next 12 months among market participants and the real sector continued to decline, albeit at a slower pace compared to January, while household expectations rose for the first time since September. According to the February survey results, 12-month-ahead annual inflation expectations decreased by 0.1 points to 25.3% for market participants and by 1.9 points to 41.9% for real sector, while increased by 0.4 points to 59.2% for households. It's worth noting that the decrease in inflation expectations across all three economic agents accelerated significantly in January compared to the previous month. In February, the slowdown in the downward trend of inflation expectations among market participants and the real sector, alongside the increase in household expectations, can be attributed to the higher than expected inflation figures for January, which surpassed 5%, as well as the upward revision of the CBT’s year-end inflation forecast. The elevated January CPI and the CBT’s upward revision of its year-end forecast were largely influenced by the increase in medical examination copayments. Following the retroactive reduction of these copayments, published in the Official Gazette on Sunday, we expect the downward trend in inflation expectations to persist into March. However, it is important to note that while a downward trajectory is observed in both the real sector and household inflation expectations, the current levels still indicate a significantly elevated rate.