Macro and Politics

*The CBT will unveil the 3^rd Quarterly Inflation Report of the year @10:30 local time. Today’s report will shed light on the Bank's future monetary policy, inflation and output expectations. The CBT Governor Karahan’s assessments on monetary policy and inflation outlook as well as the Q&A session will be closely scrutinized today. Between 10:30 am - 11:00 am, Governor Fatih Karahan will present the Inflation Report, followed by a Q&A session from 11:00 am - 11:30 am. Please recall that in the 2^nd Quarterly Inflation Report of the year, delivered on May 22^nd, the inflation forecasts remained unchanged as inflation is projected to be between 19% and 29% (with a midpoint of 24%) at end of 2025. Given the proximity to year-end, we expect today’s presentation to feature a mechanical narrowing of the year-end inflation forecast range. Accordingly, while we do not anticipate any change to the upper bound of the range at 29%, an upward revision of the lower bound from 19% to around 23% would mechanically shift the midpoint from 24% toward 26%. We also expect inflation projections for 2026 and 2027 to remain unchanged at 12% and 8%, respectively. During the Q&A session following the presentation, markets will be seeking potential clues regarding the future course of monetary policy.

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of August 1 – 8 @ 14:30 local time. Based on our calculations using the CBT’s analytical balance sheet, we estimate that during the week of August 1 – 8, net international reserves surged by USD4.24bn to USD67.4bn, while gross FX reserves climbed by USD5.36bn to USD174.5bn. Accordingly, our calculations point to gross foreign exchange reserves reaching an all-time high. We expect today’s official figures to confirm a strong rebound, in line with our projections. To recall the CBT data from previous week: During the week of July 25–August 1, foreigners recorded a limited net inflow of USD135.5mn into the equity market and USD8.8mn into the bond market (excluding repo transactions). Meanwhile, the foreigners’ share in total bond stock dropped from 6.4% to 6.3% within the mentioned week. Over the same period, residents’ FX deposits slumped by USD1.9bn (excluding gold accounts and adjusted for the EUR/USD parity effect), while their total FX deposits (including gold, price adjusted) slid by USD1.8bn during the week of 25 July – 1 August. Examining the CBT’s reserves reveals that during the week 25 July – 1 August, the gross FX reserves decreased by USD2.9bn to USD169.bn and the net international reserves eased by USD1.2bn to USD63.1bn. Moreover, the net reserves excluding swaps retreated by USD2.9bn to USD43.7bn.

* Housing sales rose to 142,858 units in July, marking a robust 32.6% increase on an annual basis and 12.4% rise m/m. Mortgage-backed sales recorded an annual gain of 60.3% and a monthly rise of 27.2% during this period, reaching 18,425 units. Turning to mortgage interest rate dynamics, the average mortgage rate stood at 44.1% in July 2024 and eased only marginally to 42.6% in July 2025, signaling a rather limited annual decline. The y/y increase in mortgaged home sales appears to have been driven by expectations of further price appreciation, despite mortgage rates remaining elevated above 40%. These expectations are likely supported by the recent stabilization in real house price depreciation, following an extended period of real term decline. The June data suggest that both the momentum in mortgage-financed sales and the underlying price dynamics persisted during the month. Turning to the breakdown of housing sales data, a total of 1,913 units were sold to foreigners in July, marking an 18.6% y/y decline. In the same month, sales to foreign buyers accounted for 1.3% of total housing transactions.