Central Bank Survey Reveals Decreased Inflation and Dollar Forecasts in Market

Overview of the Central Bank's June 2025 Market Participants Survey

The latest survey conducted by the Central Bank reveals a significant shift in market sentiment regarding monetary policy directions. Participants overwhelmingly anticipate a potential reduction in the policy rate, signaling a possible shift towards easing monetary conditions in the upcoming months.

This month's survey indicates that respondents now assign a 43% probability to a rate cut at the July Monetary Policy Committee (MPC) meeting, down from 46% in the previous survey, reflecting cautious optimism about future policy adjustments.

Inflation Expectations Show Signs of Softening

Market participants' outlook on inflation has become slightly more subdued. The current year-end consumer price index (CPI) expectation has decreased from 30.35% to 29.86%, indicating a potential easing of inflationary pressures in the near term.

Similarly, the 12-month ahead CPI expectation has declined from 25.06% to 24.56%, while the 24-month outlook has moved from 17.77% to 17.35%. These downward revisions suggest that market participants are increasingly optimistic about inflation stabilization over the coming years.

Inflation Forecast Ranges and Probabilities

For the 24-month inflation outlook, expectations are spread across three ranges:

The dominant point forecast indicates that 44.44% of market participants expect inflation to remain within the 18 – 20.99% range over the next two years.

Interest Rate Expectations and Market Sentiment

The anticipated delayed interest rate (BIST Repo and Reverse Repo Market) expectation among survey respondents has slightly decreased from 49% to 46.21%, aligning with the market's cautious outlook for future rate adjustments.

Currency and Exchange Rate Outlook

Expectations for the USD/TRY exchange rate have experienced minor adjustments. The projected year-end rate has slightly decreased from 43.70 TRY to 43.57 TRY.

Meanwhile, the 12-month outlook for USD/TRY has risen from 46.62 TRY to 47.04 TRY, reflecting ongoing currency market considerations.

Economic Growth Projections Remain Stable

Market participants maintain their growth forecasts for the Turkish economy, with no significant changes observed in expectations.

The 2025 GDP growth estimate remains at 2.9%, and the 2026 forecast holds steady at 3.7%, indicating cautious optimism about sustained economic expansion.

Note

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