Inflation Expectations Drop, But TL Pressure Persists in July 2025 CBRT Survey

The Central Bank of the Republic of Türkiye (CBRT) released its Market Participants Survey for July 2025, revealing cautious optimism across inflation, interest rate, and exchange rate projections. While inflation forecasts showed limited improvement, concerns about currency pressure, interest rate easing, and a widening current account deficit remain prominent.

Inflation Outlook Slightly Improves, Yet Remains High

According to the survey, the year-end inflation forecast (CPI) dropped marginally by 0.2 points to 29.66%, down from June. Looking ahead, 12-month inflation expectations fell to 23.39%, and the 24-month estimate eased to 17.08%. Despite this softening, participants overwhelmingly expect inflation to remain in double digits through 2026, indicating that price stability remains fragile.

Policy Rate Forecast Suggests Gradual Easing

Expectations for the benchmark interest rate, currently at 50%, point to a modest decline. The survey suggests that the policy rate may stabilize around 43.29%, while the overnight repo rate projection decreased from 46.21% to 43.31%. These figures imply that market players foresee a gradual rate cut in the latter half of the year, contingent on disinflation trends.

USD/TRY Forecast Signals Continued Depreciation of the Lira

The exchange rate forecast for USD/TRY continues to trend upward. The year-end projection climbed to 43.72, while the 12-month forecast surged to 47.70. This suggests that investor sentiment remains cautious, with lingering concerns over TL depreciation and macroeconomic volatility.

Current Account Deficit to Widen Further

The survey anticipates a current account deficit of $19.9 billion in 2025, with this figure expected to rise to $25.3 billion in 2026. Persistent external financing needs and global monetary tightening are seen as significant headwinds for Türkiye’s balance of payments.

Economic Growth Outlook Remains Flat

Expectations for GDP growth have held steady. The 2025 growth projection stands at 2.9%, while the 2026 forecast remains unchanged at 3.7%. These modest estimates underscore that Türkiye’s economic expansion will remain slow, limited by inflationary pressure and tight financial conditions.