Macro and Politics

*TURKSTAT will release October Consumer Confidence Index @ 10:00 local time. The consumer confidence index slid merely from 84.3 to 83.9 level in September. Examining quarterly averages, the index averaged 89.3 in 3Q25 following an average level of 84.6 in 2Q25. It is important to underscore that the consumer confidence index — which ranges from 0 to 200 — signals pessimism when it falls below 100, and optimism when it exceeds that threshold. A breakdown of the September consumer confidence index reveals the following: The sub-index reflecting the financial situation of household at present decreased from 70 level to 67.8, while the sub-index measuring financial situation expectation of household over the next 12 months increased marginally from 83.8 to 84. Moreover, general economic situation expectation over the next 12 months decreased barely from 78.4 to 78 and finally, the sub-index tracking assessment on spending money on durable goods over the next 12 months — a key indicator of domestic demand — rose from 104.8 to 105.7 level in September.

*The Monetary Policy Committee (MPC) decision will be announced today @ 14:00 local time. While we expect the MPC to deliver a 150bps rate cut, we do not rule out the possibility of a smaller move. Accordingly, our year-end policy rate forecast stands at 37.5%, though we see the balance of risks skewed to the upside. Our end-2026 policy rate forecast remains at 28%. As per the inflation outcomes, we estimate October CPI to increase by 2.71% m/m. If the monthly figure materializes in line with our projection, annual inflation would edge down marginally from 33.3% to 33.1%. We expect the clothing & footwear component to stand out in October inflation, with a seasonally driven double-digit increase in the 10%–15% range. Accordingly, the likelihood of headline CPI ending the year below 30% has largely diminished. In line with this view, we recently revised our year-end 2025 CPI forecast upward from 29.7% to 31.5%. For 2026, our CPI and policy rate forecasts stand at 23% and 28%, respectively.

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of October 10 – 17 @ 14:30 local time. Based on our calculations using the CBT’s analytical balance sheet, we estimate that during the week of October 10 – 17, net international reserves increased by USD2.5bn to USD81.6bn, while gross FX reserves soared notably by USD8.8bn to USD198.6bn. Accordingly, our calculations point to gross foreign exchange reserves reaching an all-time high. 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: 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.