TRY: Inflation forecasts revised up despite assurances – Commerzbank

FXStreet Insights Team FXStreet

The Turkish central bank (CBT) has adjusted its year-end inflation forecast for 2025, once again, upward to 31%-33%, compared with the previous 25%-29%. This revision aligns with existing analyst consensus forecasts. As always, the projections for future years remain unchanged (e.g. 2026: 13%-19%), Commerzbank's FX analyst Tatha Ghose notes.

Political fragility and market volatility complicate things

"Governor Fatih Karahan attributed the upward revision for 2025 to several factors, including pressure on food prices due to drought, the influence of capital flows, geopolitical tensions, constrained improvements in inflation expectations and stickiness of service prices. Despite recent inflation figures exceeding projections, primarily due to food-related price effects, the governor asserted that the broader disinflationary trend was expected to persist. We are skeptical of this claim."

"FinMin Mehmet Simsek independently noted that headline CPI inflation had eased markedly, with the annual rate in October receding to 32.9%. The ministry foresees the disinflation trend continuing, anchored by restrictive monetary settings, a supportive but disciplined fiscal stance, prudent pricing of administered tariffs and supply-side actions. We absolutely dismiss the idea that 'inflation is moderating' based on year-on-year rates of change coming down from sky-high levels. There is no pathway from current fresh month-on-month price increases to the inflation target; at this stage, repeating the claim that inflation has moderated is somewhat disingenuous."

"Despite assurances, concerns persist regarding inflation moderating sustainably. CBT’s revision of projections very much follows the historical pattern where the near-term forecast is revised up when the time frame draws close, and it has to be re-calibrated to reality. But future forecasts are maintained at unrealistic levels. Of course, political fragility and market volatility are complicating the central bank's job. Still, continued premature monetary easing against the backdrop of rising inflation risk reduces the relative attractiveness of the TRY carry, as it reduces the attractiveness of TRY deposits versus FX deposits."

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD surges to multi-day peaks past 1.3250

GBP/USD leaves behind Friday’s small pullback and advances past 1.3250 level, or five-day highs, on Monday. Cable’s upside follows extra losses in the Greenback, while traders continue to assess the geopolitical front and upcoming key events.

EUR/USD picks up extra pace north of 1.1400

EUR/USD extends its recovery past 1.1400 the figure as the NA session draws to a close on Monday. Indeed, the pair advances for the third straight day amid the persistent offered bias in the US Dollar. Meanwhile, market participants keep gearing up for the ECB Forum in Sintra and the release of critical US labour market data.

Gold bears flirt with $4,000 as Iran tensions and Fed hike bets support USD

Gold remains under some selling pressure for the second straight day on Tuesday, with bears awaiting a sustained break below $4,000 before positioning for deeper losses. Renewed US-Iran hostilities over the weekend cast doubts over the sustainability of the peace deal. This, along with elevated expectations for Fed rate hikes, offers some support to the US Dollar and keeps the bullion within striking distance of the YTD low, touched last week.

Bitcoin stalls at $60K as buyer conviction fades, Strategy authorizes BTC sales

Bitcoin is trading around the $60,000 level on Monday after a sharp decline last week. With the top crypto struggling to recover, analysts suggest the market remains firmly in defensive territory as investors await stronger signs of demand.

Just like Fed, is BoJ’s independence under threat?

When talking about central bank independence, most of the focus has been on Donald Trump’s pressure on the Federal Reserve. But a similar story, a quieter one for now, seems to be happening on the other side of the Pacific: Japan’s government may be testing the Bank of Japan’s independence.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.