Macro and Politics

*The CBT will release September Balance of Payment figures today @10:00 local time. We expect the current account to post a surplus of USD2.9bn in September. We estimate that the balance of payments-defined trade deficit narrowed to USD3.3bn, while net travel revenues declined to USD6bn and the services balance registered a surplus of around USD8.1bn. Our year-end current account deficit forecast stands at USD48bn (2.7% of GDP).

* The CBT will release the results of the Survey of Market Participants for November @ 10:00 local time. According to the CBT’s latest October 2026 Survey of Market Participants, the year-end 2026 CPI inflation expectation remained unchanged at 29.6%, while the year-end 2027 forecast rose from 22.7% to 23.3%. The 12-month-ahead inflation expectation edged up from 23.7% to 23.9%, whereas the 24-month-ahead expectation declined from 18.3% to 17.9%. The five-year-ahead expectation also increased marginally from 12.1% to 12.2%. We expect the November survey to reveal continued stickiness in market participants’ 12-month-ahead inflation expectations, consistent with the persistent inertia observed in recent months.

* At the 4Q26 Inflation Report presentation delivered by Governor Fatih Karahan, the Bank revised its year-end inflation forecasts from 28% to 29.5% for 2026, from 15% to 21% for 2027, and from 9% to 13.5% for 2028. The upward revisions largely reflect persistent energy- and food-related cost pressures, with the more pronounced 6ppt adjustment for 2027 bringing the CBT’s projection into line with the 2027–2029 Medium-Term Program and closer to market expectations. On domestic conditions, Karahan reiterated that weakening demand continues to support disinflation, with underlying inflation moderating since July and annual inflation declining across all major non-energy categories in October. Karahan cited that services disinflation has continued, while subdued demand and relatively stable TL dynamics have contained core goods inflation. We maintain our year-end 2026 CPI inflation forecast at 29.2% and expect a 100bps rate cut at the December 10 MPC meeting, bringing the policy rate to 35%. Upcoming minimum wage and administered price adjustments pose renewed inflation risks in early 2027, while recent reserve losses and portfolio outflows reinforce the need to preserve attractive TL returns. We therefore see a strong likelihood of a pause in rate cuts during the opening months of 2027.

* Foreign investors recorded net purchases of USD367.2mn in the equity and USD37mn in the bond market (excluding repo transactions) during the October 30–November 6 week. Equity inflows resumed after five consecutive weeks of outflows, offsetting more than half of the cumulative USD693.2mn in net foreign sales recorded over that period. In the bond market, the modest USD37mn inflow following three weeks of outflows suggests that foreign investor appetite has yet to recover meaningfully, particularly after the previous week's USD750.4mn outflow. Foreigners’ share in the total bond stock declined from 6.2% to 6.1%. Moreover, residents’ FX deposits (excluding gold and adjusted for the EUR/USD parity effect) increased by USD1.3bn during the October 30–November 6 week, while their total FX deposits (including gold, adjusted for the price effect) increased by USD1.5bn. In terms of official reserves: The CBT’s gross reserves increased by USD3bn to USD161.1bn during the October 30–November 6 week, while net reserves rose by USD3.2bn to USD41.1bn, marking the first weekly increase after three consecutive weeks of declines. Over the same period, the swap stock fell by USD879mn to USD12.9bn, while net reserves excluding swaps increased by USD4bn to USD28.3bn.