Macro and Politics

*The CBT will release July Balance of Payment figures today @10:00 local time. We expect the current account to post a surplus of USD615mn in July. Our projections point to a narrowing in the balance of payments-defined foreign trade deficit to USD6.2bn, alongside a widening in the services surplus to USD9bn, supported by higher net travel revenues. Our year-end current account deficit forecast stands at USD54bn, equivalent to 3% of GDP.

* The CBT will release the results of the Survey of Market Participants for September @ 10:00 local time. In the CBT’s latest August 2026 Survey of Market Participants, respondents’ year-end inflation expectations for 2026 and 2027 rose to 29.4% from 29.2% and to 21.9% from 21.5%, respectively. The 12-month-ahead inflation expectation declined to 23.7% from 24%, while the 24-month-ahead expectation edged up to 18% from 17.8%. The five-year-ahead inflation expectation, meanwhile, fell to 11.1% from 11.5%. Following the lower-than-expected August CPI print, we expect the downward trend in market participants’ 12-month-ahead inflation expectations to continue in the September survey.

* The Monetary Policy Committee (MPC) kept the policy rate unchanged at 37%, in line with our forecast and the market median. The interest rate corridor was also left unchanged, with the lower and upper bounds maintained at 35.5% and 40%, respectively. The MPC retained its forward guidance on the monetary policy stance, while offering a somewhat more constructive assessment of the inflation outlook compared with July. The statement noted that recent inflation outturns and leading indicators point to a moderation in the underlying trend, while subdued domestic demand and the limited pass-through of supply shocks to domestic prices continue to support disinflation. At the same time, elevated energy prices stemming from geopolitical developments were highlighted as an upside risk to the inflation outlook. We expect monthly CPI inflation at around 2% in September, bringing annual inflation closer to 30%. We maintain our year-end inflation forecast at 28%, although the recent escalation in geopolitical risks and higher energy costs have tilted the risks to our forecast more clearly to the upside. We believe our projected decline in annual inflation towards 30% in September should create room for a resumption of rate cuts in October. Accordingly, we continue to expect 100bp cuts in both October and December, bringing the policy rate to 35% by year-end. However, should the inflation outlook fail to improve as much as we currently expect, the scope for rate cuts could be more limited than in our baseline scenario.

* Foreign investors were net sellers of USD647.6mn in the equity market in the August 28–September 4 week, while turning net buyers of USD156.7mn in the bond market, excluding repo transactions. This marked the end of four consecutive weeks of foreign inflows into equities, while the bond market returned to net foreign inflows following three weeks of outflows. Moreover, foreigners’ share in the total bond stock increased from 7% to 7.2% over the same period. Over the same period, residents’ FX deposits (excluding gold and adjusted for the EUR/USD parity effect) fell by USD526mn, while their total FX deposits (including gold, adjusted for the price effect) decreased by USD277mn. In terms of official reserves, the CBT’s gross FX reserves fell by USD4bn to USD184.3bn, while net FX reserves decreased by USD1bn to USD65.5bn. Meanwhile, the swap stock rose by USD1.5bn to USD12.2bn, resulting in a sharper USD2.5bn decline in net reserves excluding swaps to USD53.3bn.