Macro and Politics

* The CBT will release the results of the October Market Participants’ Expectations Survey today @ 10:00 local time. Following the significantly higher than expected September inflation print, we anticipate a palpable deterioration in market participants’ year-end inflation expectations. Please recall that, in the latest survey results released for September, the year-end 2025 inflation expectation rose to 29.86%, marking the second consecutive monthly increase. For the October survey to be published today, we expect participants’ year-end forecasts to come in above the 31% level. Based on the prices we have compiled so far, we estimate October CPI inflation at 2.71% m/m, suggesting that the likelihood of year-end inflation falling below 30% has largely faded. In parallel, we have recently revised our 2025 year-end CPI forecast upward from 29.7% to 31.5%. For the upcoming MPC meeting on 23 October, we expect a 150bps rate cut, while not ruling out the possibility of a smaller move. Our year-end policy rate forecast stands at 37.5, though we see risks tilted to the upside. For end-2026, we project CPI at 23% and the policy rate at 28%.

* The CBT will release August short-term external debt stock figures @ 10:00 local time. The short-term external debt stock in July materialized at USD170.9bn, up by 1.1% m/m.  In terms of short-term debt statistics, we believe that “debt stock on a remaining maturity basis,” calculated based on the external debt maturing within 1 year or less regarding the original maturity, is rather critical, which is at USD223.3bn as of July 2025. Of this total, USD24.6bn is attributed to loans taken by resident banks and private sector affiliates from their branches and affiliates abroad. Stripping this amount from the total results in USD198.7bn. We also add 12-month forward-looking CAD expectations on this amount so as to reach Turkey’s annual external financing need (EFN).  Accordingly, we calculate EFN as of July 2025 around USD220bn.

*The credit rating agency S&P is expected to release Turkey’s sovereign rating review today. Any possible review announcement would likely come late at night Turkish time. It’s important to note that these calendars are only reference points and do not guarantee that the agencies will conduct a review or make a new rating decision. Please note that S&P last revised Turkey’s sovereign credit rating on April 25, affirming Turkey’s long-term sovereign credit rating at ‘BB-’ with a "stable" outlook. We expect S&P to maintain Turkey’s sovereign credit rating in its review scheduled for today, though an upward revision in the outlook from “stable” to “positive” appears likely. It’s worth noting that credit rating agencies Moody’s, S&P and Fitch currently assess Turkey three notches below investment grade, all with a stable outlook.

* There was a modest net foreign outflow from the equity market in the week of 3–10 October, amounting to USD109.7mn, while the bond market (excluding repo transactions) saw a net foreign inflow of USD307.8mn. Moreover, during the same period, the residents’ FX deposits dropped by a mere USD99mn (excluding gold accounts and adjusted for the EUR/USD parity effect), while their total FX deposits (including gold, price adjusted) climbed drastically by USD1.4bn. Hence, it’s evident that soaring gold prices have prompted a surge in demand across households and corporates alike. In terms of official reserves, the CBT’s gross FX reserves increased by USD3.5bn to USD190bn and net international reserves rose by USD4bn to USD79.1bn, while net reserves excluding swaps climbed by USD2.3bn to USD61.7bn. Consequently, net reserves excluding swaps have exceeded USD60bn for the first time since the March 19 period.