Macro and Politics

*The CBT will release July Real Effective Exchange Rate (REER) today @14:30 local time. Considering the inflation data and the average Basket/TRY change for July, we expect the REER to ease from 69.97 to 69.54, implying a 0.6% real depreciation of the Turkish lira.

* TURSTAT will release July 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 July to be approximately 2.2%. We expect a similar outcome in today’s adjusted figures.

* The CBT will release the Monthly Price Developments report for July 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 2.1% m/m in July, lower than our house forecast and the median estimate at 2.4%, with the annual CPI declining from 35% to 33.5% in July. Moreover, monthly PPI rose by 1.73% m/m, while the annual figure eased slightly from 24.5% to 24.2%. The key driver pushing the monthly CPI above the 2% in July was the series of administered price and tax adjustments. Conversely, the 5.8% decline in the clothing and footwear category exerted a disinflationary impact, playing a major role in the downside surprise relative to expectations. While we maintain our end-2025 inflation forecast at 31%, we see downside risks are mounting. With the temporary impact of July’s one-off price and tax hikes expected to fade, we anticipate monthly CPI to retreat slightly below 2% in August. However, we estimate that a sub-1.5% monthly inflation reading, as seen in June, is unlikely before year-end.