Macro and Politics

* TURKSTAT will release January Industrial Production (IP) figures today @ 10:00 local time. Following the strong increase in December, we anticipate a slowdown in January's IP figures. Please note that the sequential IP (the seasonal and calendar adjusted monthly figure) surged by 5% m/m in December 2024, while the calendar adjusted IP soared by 7% y/y. Our expectation for a weaker January IP is primarily driven by declining leading indicators for the month, coupled with the ICI Manufacturing PMI falling to 48, its steepest monthly decline since September. Additionally, potential adjustments in highly volatile components are likely to put further downward pressure on the January IP data.

* The CBT has unveiled the results of the March 2025 Market Participants' Expectations Survey. Following the partial retroactive reduction of the medical examination copayment increases and February inflation realizations coming in below expectations at 2.3%, the participants’ year-end inflation forecast slid merely to 28% from 28.3%. Meanwhile, participants' monthly inflation expectation for March came in at 2.3%. Our 2025YE inflation forecast for 2025 is 28%. Furthermore, participants’ expectations for the 3-month-ahead policy rate are at 37.70%. This suggests a cumulative rate cut of 480bps over two months, with a somewhat slowed rate-cut trajectory compared to the current 250bps reductions. We expect the MPC to continue its rate cuts with a 250-bps reduction at its upcoming meeting on April 17th. Yet, given that the supportive impact of base effects will wane in the second half of the year and that leading indicators for 1Q25 suggest resilient than expected economic activity, we anticipate a slower pace of easing, starting from the June meeting. We project the 2025 year-end policy rate at 30%.