Macro and Politics

* The CBT raised its eight-week loan growth limits from 3% to 3.5% for general purpose and vehicle loans extended to consumers, from 5% to 5.5% for TL loans extended to SMEs, and from 2% to 2.5% for TL loans extended to non-SME enterprises. The Bank also introduced remuneration in TL for required reserves maintained by banks and financing companies against their TL- and FX-denominated non-deposit liabilities with maturities longer than one year. We view these measures as a targeted effort to support the credit transmission channel amid an increasingly pronounced slowdown in domestic demand. While the higher loan growth limits provide modest additional room for credit expansion, the remuneration of required reserves could ease banks’ funding costs, supporting profitability and lending capacity. We therefore interpret these measures as a calibrated macroprudential adjustment aimed at cushioning the slowdown in economic activity, rather than a broader easing of the monetary policy stance.

*The CBT will unveil the 4^th Quarterly Inflation Report of the year @10:30 local time. We do not expect any changes to CBT’s inflation forecasts at today’s presentation, yet we do not rule out the possibility of an upward revision to its 2027 inflation forecast of 15%, which is quite optimistic compared to market median forecasts hovering around 21%. Governor Karahan’s assessments regarding the inflation outlook, monetary policy stance and growth dynamics, along with the Q&A session, will be closely monitored. It is worth recalling that at its latest 3^rd Inflation Report presentation of the year on August 13, the Bank revised its inflation forecast for the end of 2026 upward from 26% to 28%. The inflation forecasts for the end of 2027 and 2028 were left unchanged at 15% and 9%, respectively. Meanwhile, the interim targets, which serve as a commitment and anchor and are not intended to be revised unless extraordinary circumstances arise, were maintained at 24% for 2026, 15% for 2027 and 9% for 2028.

* The CBT will release weekly foreign portfolio flows and money & banking statistics for the October 30 – November 6 period today at 14:30 local time. Based on our calculations using the CBT’s analytical balance sheet, we estimate that gross reserves increased by USD3.2bn to USD161.3bn, while net reserves rose by USD3.5bn to USD41.4bn during the October 30–November 6 week. Our estimates suggest that higher gold prices contributed USD1.4bn to the weekly increase in net reserves. Meanwhile, we calculate that the swap stock declined by USD733.4mn to USD13bn, while net reserves excluding swaps increased by USD4.2bn to USD28.4bn. Adjusting for gold valuation effects, swap transactions and changes in public sector FX deposits, our calculations point to USD2.9bn in net FX purchases by the CBT from the market during the week. We expect today’s official data to confirm an increase in reserves broadly in line with our analytical balance sheet-based estimates. To recall the previous week’s data: Foreign investors were net sellers of USD66.3mn in the equity and USD750.4mn in the bond market (excluding repo transactions), during the October 23–30 week. Residents’ FX deposits (excluding gold and adjusted for the EUR/USD parity effect) increased by USD748mn during the October 23–30 week, while their total FX deposits (including gold, adjusted for the price effect) rose by USD585mn.  The CBT’s gross reserves declined by USD4.1bn to USD158.1bn, net reserves fell by USD4.8bn to USD37.9bn and net reserves excluding swaps contracted by USD6.5bn to USD24.2bn.