Macro and Politics

*The CBT will unveil the 4^thd 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. 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.

* The Treasury and Finance Ministry will release October cash budget figures @ 17:30 local time. The Treasury’s cash budget posted a deficit of TL359.9bn in September, while the primary balance recorded a deficit of TL133.1bn. Cumulatively, the cash deficit reached TL1.6tn in the first nine months of the year, with a primary deficit of TL100.2bn. Meanwhile, the central government budget posted a deficit of TL309.6bn in September, and a primary deficit of TL73bn. Consequently, the cumulative budget deficit reached TL1.2tn in Jan – Sep, corresponding to 63% of our 2025 full-year deficit forecast, while the primary balance recorded a surplus of TL445.1bn during the same period. Today’s cash budget data are indicative for central government budget figures to be released on November 17. Our year-end 2025 budget deficit forecast stands at TL2.3tn (3.7% of GDP). In the Medium-Term Program (OVP) for 2026 – 2028, the budget deficit-to-GDP ratio for 2025 was revised upward from 3.1% to 3.6%, and for 2026 from 2.8% to 3.5%.

* In the week of October 24–31, foreign investors were net buyers of USD242.8mn in the equity market, marking the first week of inflows following four consecutive weeks of outflows. During the preceding four-week period, cumulative foreign outflows had amounted to USD490.3mn. In the same week, foreigners were also net buyers of USD486.6mn in the government bond market (excluding repo transactions), while the foreign share in total government bond stock increased from 6.5% to 6.7%. Moreover, during the week of October 24 – 31, the residents’ FX deposits rose by USD130mn (excluding gold accounts and adjusted for the EUR/USD parity effect), while their total FX deposits (including gold, price adjusted) increased by USD800mn during the week of October 24 – 31. In terms of official reserves, the CBT’s gross FX reserves decreased by USD1.9bn to USD183.6bn, while net international reserves increased by USD1.5bn to USD69.2bn. Net reserves excluding swaps, moreover, edged up by USD0.6bn to USD52.5bn.