Macro and Politics

* Foreign investors recorded net inflows of USD579.4mn into the equity market and USD243mn into the bond market (excluding repo transactions) in the week of April 10 – 17. This marked the second consecutive week of foreign inflows into the bond market, while foreigners’ share in the total government bond stock increased from 5.8% to 5.9% in the week of April 10 – 17. In the eurobond market, foreign investors were also net buyers, albeit at a limited scale, with inflows totaling USD28.8mn during the week. Moreover, during the same period, the residents’ FX deposits (excluding gold, EUR/USD parity effect adjusted) increased by USD1.3bn, with the entire rise driven by corporate demand, while their total FX deposits (including gold, price-adjusted) posted a net increase of USD1.4bn.In terms of official reserves: The CBT’s gross FX reserves increased by USD3.6bn to USD174.5bn, net FX reserves rose by USD2.8bn to USD58.3bn and net reserves excluding swaps soared by USD7.6bn to USD39.6bn. Recall that net reserves excluding swaps had declined to USD18.3bn in the week of March 27 – April 3, marking the lowest level since May 2025. The cumulative increase over the past two weeks has now exceeded USD20bn.

* The CBT released the results of the April Sectoral Inflation Expectations (SIE) survey, which pointed to a continued rise in inflation expectations across economic units in April. Accordingly, 12-month-ahead annual inflation expectations increased by 1.22 points to 23.39% for market participants, by 0.80 points to 33.7% for the real sector, and by 1.67 points to 51.56% for households compared to the previous month. In addition, the share of households expecting inflation to decline over the next 12 months fell by 0.57 points to 14.57%, while the proportion expecting inflation to increase rose by 1.84 points to 71.12%. Recall that the March survey had already pointed to a broad-based increase in expectations across all segments. Taken together, the latest readings suggest that the impact of heightened geopolitical risks and rising energy prices is increasingly feeding through to expectations, with the deterioration in inflation expectations persisting. On the other hand, according to the Household Expectations Survey (HES), also released on Friday and designed to capture households’ expectations regarding inflation, the exchange rate, housing prices, and investment behavior, the product/service groups that households identified as having experienced the highest price increases over the past year—and those expected to record the strongest increases over the next 12 months—were “food” and “fuel and energy.” In this context, the share of respondents identifying food as the product group with the highest price increases rose by 0.2 points to 40.7%. Meanwhile, 12-month-ahead USD/TRY expectations edged down slightly by TL0.03 to TL52.12. Despite the rise in inflation expectations, the relatively contained outlook in FX expectations, coupled with the weak course of residents’ FX deposits, suggests that there is no pronounced domestic FX demand at this stage. All in all, we assess that upside risks to the inflation path remain firmly in place. Reflecting this outlook, we have recently revised our year-end 2026 inflation forecast to 28% and continue to see the balance of risks tilted to the upside.