Macro and Politics

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of March 13 – 19 @ 14:30 local time. Our calculations based on the CBT analytical balance sheet suggest that the decline in reserves persisted into the following week. In the shortened week of March 13–19 due to the holiday period, we estimate that gross FX reserves slid by a further USD12.3bn to USD177.5bn, while net FX reserves slumped by USD11.4bn to USD57.4bn. We expect today’s official data to confirm a reserve decline broadly in line with our calculations. To recall the previous week’s data: Foreign investors recorded net sales of USD321.8mn in equities and USD2.9bn in the bond market (excluding repo transactions) in the week of March 6–13. Accordingly, foreign outflows from the bond market extended into a fourth consecutive week, bringing the cumulative outflow over this period (ex-repo) to USD5.8bn. Besides, the foreign share in the total government bond stock declined further to 6.9% from 8.1%. Meanwhile, since the onset of the US–Iran conflict in the week of February 27–March 6, cumulative foreign outflows over the subsequent two-week period reached USD1.1bn in equities and USD4.6bn in bonds (excluding repo transactions). During the same period, the residents’ FX deposits declined by USD816mn (excluding gold, EUR/USD parity effect adjusted), while their total FX deposits, (including gold, price adjusted), declined by USD1.2bn. Over this period, gross FX reserves fell by USD7.8bn to USD189.8bn, net FX reserves declined by USD9.8bn to USD68.9bn, and the net reserves excluding swaps dropped by USD10.7bn to USD54.2bn.

* According to the March Sectoral Inflation Expectations (SIE), inflation expectations increased across all economic units. Hence, the 12-month-ahead inflation expectation rose by 0.07pp m/m to 22.17% for market participants, by 0.90pp to 32.9% for the real sector, and by 1.08pp to 49.89% for households. At the same time, the share of households expecting inflation to decline over the next 12 months fell by 5.19pp to 15.14%, while the share anticipating an increase rose by 5.9pp to 69.23%. This broad-based deterioration points to the growing impact of elevated geopolitical risks and rising energy prices on expectations formation. Meanwhile, results from the March Household Expectations Survey (HES) indicate that households’ inflation perceptions and forward-looking expectations are increasingly concentrated in food and fuel-energy categories. Within the same survey, the 12-month-ahead house price inflation expectation edged down slightly to 35.05%, while the USD/TRY expectation increased by TL0.59 to TL52.15.