Macro and Politics

*The Treasury will hold 2y fixed coupon and 7y FRN bond auctions today. According to three-month (May – July 2025) domestic borrowing program, the Treasury has a domestic redemption of TL160.7bn in May, while in return it plans to borrow TL187.5bn in total throughout the month via four auctions and two direct sales. The first Treasury auctions of May will be held today. The Treasury is set to issue a new 2y fixed-coupon bond, which will replace the February 10, 2027-maturity bond as Turkey’s new benchmark bond once it begins trading. In addition, the Treasury will also conduct an auction for a 7y FRN note today.

*The CBT will release April Real Effective Exchange Rate (REER) today @14:30 local time. Considering the inflation data and the average Basket/TRY change for April, we expect the REER to decline from 73.48 to 72.27, implying a 1.6% real depreciation of the Turkish lira.

* TURSTAT will release April seasonally adjusted CPI and special CPI aggregates today @16:00 local time. Based on our calculations, we forecast the seasonally adjusted monthly CPI change for April to be approximately 2.8%. We expect a similar outcome in today’s adjusted figures.

* The CBT will release the Monthly Price Developments report for April today @18:00 local time. The report is a technical one and does not contain a policy message. Still, the assessment of trend core inflation will be monitored closely.

* The CPI rose by 3.0% m/m in April, slightly below both our in-house estimate of 3.08% and the market consensus of 3.2%. On an annual basis, CPI inflation edged down from 38.1% to 37.9%, reflecting a noticeable deceleration in the pace of disinflation. Meanwhile, the PPI increased by 2.8% m/m, with annual PPI inflation easing from 23.5% to 22.5%. Our year-end inflation forecast for 2025 stands at 31%. We anticipate the pace of disinflation to moderate over the summer months compared to the earlier part of the year. In light of recent domestic developments, we do not foresee a near-term rate cut by the CBT. While we expect the June meeting to result in a hold, we currently assign a low probability to a rate cut in July as well. The additional macroprudential measures introduced recently by the CBT are also consistent with our view that policy rates will remain elevated for an extended period.