Macro and Politics

* The CBT will release the September Sectoral Inflation Expectations survey @ 10:00 local time. According to the results of the August Sectoral Inflation Expectations Survey, 12‑month ahead inflation expectations fell by 0.6pp to 22.8% for market participants, by 1.3pp to 37.7% for the real sector and by 0.4pp to 54.1% for households. While the decline in inflation expectations across economic agents persists, the significant dispersion among expectation levels remains evident. In line with the CBT’s guidance that it focuses on the trajectory rather than the absolute level of expectations, we view the ongoing moderation as supportive for prospective rate cuts. Our year-end 2025 CPI forecast stands at 29.7%, while our 12-month ahead (August 2026) CPI forecast is 23%.

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of September 12 – 19 @ 14:30 local time. Based on our calculations using the CBT’s analytical balance sheet, we estimate that during the week of September 12 – 19, net international reserves rose by USD1bn to USD70.5bn, while gross FX reserves increased by USD1bn to USD179bn. We anticipate that today’s official reserve data will likely reflect a similar rise in line with our estimates. To recall the previous week’s data: In the week of September 5 – 12, foreign investors registered net sales of USD165mn in the equity market, while posting net purchases of USD588mn in the bond market, excluding repo transactions. Consequently, the foreign share in the total government bond stock edged up from 6.4% to 6.6%. Moreover, during the same period, the residents’ FX deposits climbed by USD714mn (excluding gold accounts and adjusted for the EUR/USD parity effect), while their total FX deposits (including gold, price adjusted) soared by USD1.4bn during the week of September 5 – 12. In terms of official reserves, the CBT’s gross FX reserves dropped USD2.2bn to USD178bn and net international reserves slid by USD1.6bn to USD69.5bn. Lastly, net reserves excluding swaps decreased by USD2.5bn to USD51.8bn.

* The unadjusted Real Sector Confidence Index (RSCI) decreased from 100.6 level to in September, while the seasonally adjusted index increased from 100.6 to 100.8. Accordingly, the unadjusted RSCI, which averaged 101.6 in the second quarter of the year, retreated to 100.3 in the third quarter. It is worth recalling that readings below the threshold of 100 in the RSCI reflect a waning sentiment among real sector representatives regarding economic activities. Meanwhile, the Capacity Utilization Rate (CUR) edged up from 73.5% to 74% in September, while the seasonally adjusted CUR rose from 73.6% to 73.8%. Following the robust economic growth recorded in the second quarter, leading indicators point to a deceleration in economic activity in the third quarter. While our full-year growth forecast for 2025 remains at 3.1%, the stronger-than-expected 2Q25 growth and subsequent data revisions suggest rising upside risks to our baseline. We are in the process of recalibrating our growth model following TURKSTAT’s comprehensive revisions to the National Accounts System. At this stage, we expect year-end 2025 growth to materialize in the 3.3% – 3.5% range.