Macro and Politics

*The CBT will unveil the 1^st 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. In its latest Inflation Report presentation on November 7, the CBT maintained its 2026 year-end inflation forecast range at 13%–19%, keeping the interim target unchanged at 16%. However, January’s monthly CPI print of 4.84%, which came in markedly above market expectations, has heightened upside risks to the ongoing disinflation process. As of January 2026, the CPI series transitioned to a new base year (2025=100) and adopted the updated ECOICOP v2 classification (the latest EU-aligned framework), while expenditure weights were recalibrated based on National Accounts Household Final Consumption Expenditure data. In its blog post titled “Updates to the 2026 Consumer Price Index and Their Implications,” the CBT noted that the weight revision alone could add approximately 1pp to annual inflation. We believe that this technical adjustment may warrant a limited upward revision to the interim target, which the CBT had previously indicated would remain unchanged barring extraordinary circumstances. We also expect the 2026 year-end forecast range to be revised from 13% – 19% to 16% – 22%, bringing the upper bound closer to the 22% area.

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of January 30 – February 6 @ 14:30 local time. Based on our calculations derived from the CBT’s analytical balance sheet, we estimate that during the week of January 30 – February 6 gross FX reserves fell sharply by USD10.6bn to USD207.6bn, largely reflecting lower gold prices, while net international reserves declined by around USD2bn to USD91.2bn. We expect the official figures to broadly confirm our estimates. To recall the previous week’s data: Foreign investors recorded net purchases of USD455mn in equities and USD721.8mn in government bonds (excluding repo transactions) during the January 23 – 30 period. As a result, the foreign share in the total government bond stock increased from 8.6% to 8.9%, marking the highest level since February 2020. Moreover, during the mentioned week, the residents’ FX deposits retreated by USD2.4bn (excluding gold, EUR/USD parity effect adjusted), while their total FX deposits (including gold, price adjusted) increased by USD1.9bn. In terms of official reserves, the CBT’s gross FX reserves soared by USD2.6bn to USD218.2bn, net international reserves dropped by USD4bn to USD93.2bn and net reserves excluding swaps eased by USD2.9bn to USD82.4bn.