Macro and Politics

* The Treasury will hold the direct sales of a 1y gold-denominated bond and a 1y gold-denominated lease certificate today and finalize its domestic borrowing program for January.  According to the Treasury’s Jan – Mar 2026 domestic borrowing strategy, total redemptions of TL613.3bn scheduled for January are set to be met through three direct sales and seven auctions, with planned domestic borrowing amounting to TL487.7bn, implying a targeted rollover ratio of 80%. Having already raised TL336bn from domestic markets so far this month, the Treasury is likely to borrow around TL152bn via today’s direct sales.

* The CBT will release the January Sectoral Inflation Expectations survey @ 10:00 local time. According to the CBT’s Sectoral Inflation Expectations Survey for December, 12-month-ahead annual inflation expectations declined across all sectors compared to the previous month. Accordingly, expectations eased by 0.14pp to 23.35% for market participants, by 0.9pp to 34.8% for the real sector, and by 1.34pp to 50.9% for households. While inflation expectations across economic agents have followed a downward trend since early 2024, the pronounced divergence between sectors remains intact. Considering the adaptive nature of expectations among economic agents and our inflation forecasts, we expect the gradual easing in sectoral inflation expectations to persist in the period ahead. In the CBT’s January Market Participants Survey, the end-2026 CPI expectation was revised slightly down to 23.2% from 23.4%, while the end-2027 projection edged up to 17.8% from 17.5%. Moreover, longer-term inflation expectations also improved, with the 24-month-ahead CPI declining to 16.9% and the five-year-ahead CPI easing to 11.1%. Today’s Sectoral Inflation Expectations Survey release will provide key insight into the evolution of inflation expectations across both households and the real sector.

*The CBT announced changes to the reserve requirement ratios for Turkish lira funding obtained from abroad with maturities up to one year, in order to strengthen macro financial stability and the monetary transmission mechanism. Accordingly, the reserve requirement ratios for Turkish lira-denominated funds from repo transactions abroad and loans obtained from abroad have been raised by two percentage points to 20% for maturities up to one month, 16% for maturities up to three months, and 14% for maturities up to one year. Additionally, the reserve requirement ratios for deposits/participation funds from banks abroad and liabilities to the head office abroad with maturities up to one year have been raised to 14%. Under the amendments to the Reserve Requirements Communiqué (No. 2013/15), the CBT further increased reserve requirement ratios for FX/price-protected accounts, setting the ratio at 40% for maturities of up to six months and 22% for maturities of one year and longer. Reserve requirements for accounts with floating rates indexed to CPI, PPI and TLREF were announced at 10%. We view this measure as an effort to make short-term offshore TL borrowing somewhat more costly, thereby steering related funding flows toward a more balanced footing. Yet, given the relatively limited magnitude of the increases, we expect the overall market impact to remain limited.

* Fitch revised the outlook to positive, while Moody’s took no rating action. In their reviews released on Friday, Moody’s announced that it had completed its periodic assessment without taking any rating or outlook action, while Fitch Ratings affirmed Türkiye’s sovereign rating at BB- and revised the outlook from stable to positive. Moody’s emphasized that the absence of a rating action should not be interpreted as signaling an imminent move, while noting that Türkiye’s credit profile continues to be supported by its large and diversified economic base as well as relatively low public debt. Moody’s further highlighted its expectation for inflation to decline to 22% by end-2026, alongside a fiscal consolidation trajectory that continues to underpin the disinflation process. The agency also projected real GDP growth to strengthen to 3.5% in 2025, supported by unexpectedly resilient domestic demand. Fitch, for its part, attributed the outlook revision to stronger-than-expected reserve accumulation, a further reduction in external vulnerabilities, improvements in the quality of reserves, and the continued maintenance of a relatively tight macroeconomic policy stance. In its macro projections, Fitch projects Türkiye’s economy to expand by 3.5% in 2026 and 4.2% in 2027, while inflation is expected to ease to 19.5% by end-2027. The agency also anticipates the real policy rate to stand at 4.5% by end-2026, moderating to 2% by end-2027. Türkiye’s next scheduled sovereign rating review will be conducted by S&P Global Ratings on 17 April.