Macro and Politics

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of April 10 – 17 @ 14:30 local time. Based on our calculations derived from the CBT’s analytical balance sheet, we estimate that gross FX reserves rose by USD3.5bn over the April 10 – 17 week to USD174.4bn, while net FX reserves increased by close to USD4bn to USD59.5bn. We further calculate that the CBT conducted nearly USD9bn in FX purchases during this period, with the net reserves excluding swaps rising from USD32.1bn to USD39.5bn. To recall the previous week’s data: Foreign investors recorded net inflows of USD430.3mn into the equity market and USD712.7mn into the bond market (excluding repo transactions) in the week of April 3 – 10. During the same period, FX deposits (excluding gold, EUR/USD parity effect adjusted) held by residents declined by USD1.2bn, while their total FX deposits (including gold, price adjusted) posted a net decline of USD987mn. Moreover, in the week of April 3 – 10, the CBT’s gross FX reserves increased by USD9.3bn to USD171.1bn, while net FX reserves rose by USD9.9bn to USD55.5bn. During the same period, the swap stock declined by USD3.8bn to USD23.4bn, leading to a USD13.7bn increase in net reserves excluding swaps, which reached USD32.1bn.

* The MPC kept the policy rate unchanged at 37% and maintained the corridor at 35.5%–40%, versus our expectation of a hike to 40% in line with market rates. Following the decision to keep rates unchanged, we expect funding to remain concentrated at the upper bound in the near term. The statement pointed to elevated and volatile energy prices amid geopolitical uncertainty, noting that inflation’s underlying trend eased in March but is likely to pick up in April. It also highlighted signs of a slowdown in economic activity and ongoing second-round risks. We expect April CPI at 3.3% m/m (31.3% y/y) and maintain our year-end forecast at 28%. Following Wednesday’s decision, the unchanged policy rate effectively caps further upside in market rates and signals a preference to preserve the current policy framework, supported by easing geopolitical risks, a partial recovery in reserves, and a more cautious growth outlook. We expect the WACF to remain around 40% in the near term. As uncertainty recedes, a gradual return to weekly repo auctions could bring market rates closer to the policy rate, potentially paving the way for a gradual easing cycle over the summer. Our year-end policy rate forecast stands at 35%. Looking ahead, following Wednesday’s rate-setting meeting, attention will turn to the CBT’s 2026 Q2 Inflation Report on 14 May. In light of higher energy prices after the US–Iran conflict, we expect upward revisions to both the forecast range and the interim target.

* The consumer confidence index posted a modest increase in April, rising to 85.5 from 85. The index ranges between 0 and 200, with readings above 100 indicating optimism and those below 100 pointing to a pessimistic outlook among consumers. A breakdown of the April data reveals a mixed picture across subcomponents. The index tracking households’ current financial conditions declined to 71.8 from 72.8, while expectations for households’ financial situation over the next 12 months improved, with the respective sub-index increasing to 87.5 from 85.6. Meanwhile, expectations regarding the general economic outlook over the next 12 months edged down to 78.3 from 79.1. In contrast, the index measuring intentions to spend on durable goods, which is an important proxy for domestic demand, rose to 104.4 from 102.7. Overall, the data suggest that, rather than signaling a broad-based improvement in consumer confidence, the uptick in April reflects a partial recovery in expectations alongside a continued weakness in current conditions. Despite a relative easing in geopolitical risks, we do not yet observe a sustained improvement in consumer sentiment.