Foreign Institutions Lower Turkiye’s Inflation Expectations

Major international banks, including J.P. Morgan, Morgan Stanley, and Barclays, have revised their year-end inflation forecasts for Turkiye, citing a slowdown in inflationary pressures.

Foreign institutions are beginning to lower their inflation expectations for Turkiye. According to recent data, major banks have adjusted their forecasts downward, reflecting a positive outlook on Turkiye’s inflation trajectory.

The Turkish Statistical Institute reported that the Consumer Price Index (CPI) increased by 1.64% and the Domestic Producer Price Index (D-PPI) by 1.38% in June. Annual inflation stood at 71.6% for consumer prices and 50.09% for domestic producer prices. This marks a notable decrease from May’s annual CPI of 75.45%.

Following the easing inflation, J.P. Morgan revised its year-end inflation forecast for Turkiye from 43.5% to 42.5% and its 2025 forecast from 25.2% to 25%. The report highlighted unexpected drops in core goods prices and the potential impact of the Turkish Lira’s real appreciation combined with upcoming adjustments to pensions and civil servant salaries.

Morgan Stanley also adjusted its year-end inflation prediction from 43.4% to 42.4%, while Barclays lowered its forecast from 44.5% to 44%. Barclays further predicted that Turkiye’s first interest rate cut could occur in January 2025, potentially followed by additional monetary easing later in the year.

Goldman Sachs noted the likelihood of a slight uptick in inflation in July due to regulatory changes and a stabilization in core goods inflation, but projected a continued decline in the second half of the year.

HSBC and UBS echoed these sentiments, with UBS forecasting that annual inflation could drop below 50% by August, reaching around 45% by year-end. Fitch Ratings’ Senior Director and Turkiye Analyst, Erich Arispe Morales, emphasized the importance of consistent fiscal and monetary policies to sustain this positive trend and improve Turkiye’s creditworthiness.

Source: AA / Prepared by Irem Yildiz

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