Macro and Politics

* TURKSTAT will release April house sales figures @ 10:00 local time. House sales totaled 110,795 units in March, indicating a 1.8% decline m/m, while registering a 5.1% increase on an annual basis. It’s worth noting that the 5.1% annual rise in March represents the weakest year-on-year expansion in housing sales since June 2024. Moreover, mortgage-backed home sales rose by 8.6% m/m to 18,225 units, while posting a robust 41.5% increase compared to the same period last year. The share of mortgage-backed sales in total sales climbed from 15% in February to 16.4% in March. We assess that the recent rise in mortgage-backed sales has been driven by expectations of an imminent rebound in housing prices, following a period of real-term decline, as the CBT embarked on a rate-cutting cycle. However, in light of the heightened domestic financial turbulence since March 19 and the CBT’s recent effective rate hike, we reckon that momentum in mortgage-driven sales may begin to decelerate as of April.

* The CBT will release the May Sectoral Inflation Expectations survey @ 10:00 local time. According to the April survey results, the escalation in political tensions since March 19 prompted an upward revision in inflation expectations among market participants and the real sector, while household expectations remained broadly unchanged. That said, we believe the tightening in domestic financial conditions – reflected in overnight rates reaching as high as 49% – has effectively contained FX-driven inflationary pressures. As such, we expect the year-end inflation forecast in the May survey to edge slightly below the 30% threshold. Beyond inflation expectations, participants’ projections regarding the policy rate will also be closely monitored. Assessing signals from the CBT and broader economic administration, along with reserve dynamics and both domestic and external conditions, we do not foresee a rate cut in the near term. Therefore, while we foresee the Bank holding steady at its June meeting, we also retain a cautious stance regarding the possibility of a cut in July.