Macro and Politics

* TURKSTAT will release October inflation data today @ 10:00 local time. We expect the monthly CPI to rise by 2.71% in October, slightly lower than the market consensus at 2.8% (Bloomberg). A realization in line with our forecast would imply a modest decline in annual CPI from 33.3% to 33.1%. For the coming period, we anticipate a notable slowdown in monthly inflation over the final two months of the year, with CPI likely to fall below 2% in November—reflecting seasonal factors—and approach 1% in December. Our year-end CPI forecasts stand at 31.5% for 2025 and 23% for 2026. Following today’s inflation release, attention will shift to the CBT’s 4Q25 Inflation Report presentation scheduled for Friday, November 7. As a reminder, in the previous presentation held in August, the Bank announced a change in its medium-term forecasting framework, introducing year-end interim targets that would serve as commitment and anchoring tools alongside the Inflation Report projections. Under this new approach, inflation was projected to be in the 25–29% range for end-2025 and 13–19% for end-2026, with interim targets set at 24% and 16%, respectively. In this week’s presentation, we expect the CBT to revise its 2025 year-end forecast range (25–29%) upward, while any adjustment to the 2026 range will provide valuable guidance on the CBT’s tolerance for disinflation risks and its prospective policy path.

*Istanbul Chamber of Industry (ICI) Turkey October Manufacturing PMI will be announced @ 10:00 local time. The Istanbul Chamber of Industry (ICI) Turkey Manufacturing PMI fell from 47.3 in August to 46.7 in September. Accordingly, after averaging 47.06 in the second quarter, the PMI eased to 46.63 in the third quarter. Remaining below the 50-threshold since April 2024, the index highlights that the sector has been losing momentum for more than a year. The accompanying note underlined that firms again recorded slowdowns in new orders and output and were reluctant to commit to hiring or the fresh purchasing of inputs. Meanwhile, inflationary pressures strengthened but remained muted relative to the respective series averages. Leading indicators point to a slowdown in activity in the third quarter compared to the previous one. The sharp expansion in industrial output observed in the second quarter (6.1% YoY) was largely driven by a favorable base effect. As this effect fades in the third quarter, we expect the underlying weakness in industrial activity to become more evident. Taking into account the stronger-than-expected first-quarter GDP outturn and the comprehensive revisions to the national accounts by TURKSTAT, we have revised our 2025 year-end growth forecast upward from 3.1% to 3.4%.

*The CBT will release the weekly foreign portfolio flows and money & banking statistics for the period of October 17 – 24 @ 14:30 local time. The weekly foreign portfolio flows and money & banking statistics, typically released alongside the reserves data in every Thursday, will be published today due to the Republic Day holiday. To recall the previous week’s data: There was a net foreign outflow from the equity market in the week of 10 – 17 October, amounting to USD178mn, while the bond market (excluding repo transactions) experienced a net foreign inflow of USD151.1mn. Moreover, during the same period, the residents’ FX deposits increased by USD1.2bn (excluding gold accounts and adjusted for the EUR/USD parity effect), while their total FX deposits (including gold, price adjusted) climbed by USD2.3bn.

* According to TURKSTAT’s foreign trade data, exports rose by 2.8% y/y to USD22.6bn in September, while imports increased by 8.7% y/y to USD29.5bn. Consequently, the foreign trade deficit widened from USD4.2bn to USD6.9bn, with the 12-month rolling deficit rising from USD87.5bn to USD89.2bn. Excluding energy and gold, the trade balance posted a USD1.2bn deficit during the month. Accordingly, we expect the current account balance to post a surplus at USD2.1bn in September. We expect the BoP-defined trade deficit to have widened from USD2.8bn to USD4.4bn, while the services surplus likely narrowed from USD9.5bn to USD7.6bn due to weaker net travel revenues. Our year-end 2025 current account forecast stands at USD22bn (1.5% of GDP), though we assess the risks to this projection as tilted to the downside.