Turkey’s Market Expectations Shift in January as Inflation and Interest Rate Forecasts Ease

The Central Bank of the Republic of Turkey (CBRT) has released the January 2026 results of its Market Participants Survey, offering a detailed snapshot of how economists, financial institutions, and representatives of the real sector view the country’s economic trajectory. The survey, closely monitored by investors and policymakers alike, reveals updated expectations for inflation, interest rates, exchange rates, and economic growth, highlighting a cautiously improving outlook alongside persistent structural challenges.

The January survey was conducted with the participation of 72 respondents from the real and financial sectors, making it one of the most comprehensive forward-looking assessments of market sentiment in Turkey. Compared with the previous survey period, the latest results show moderation in inflation and interest rate expectations, while projections for the exchange rate and growth remain broadly stable.

Inflation Expectations Continue to Decline Gradually

One of the most notable takeaways from the January 2026 survey is the continued downward revision in inflation expectations, signaling growing confidence in the disinflation process.

Market participants now expect consumer price inflation (CPI) to reach 23.23% by the end of the current year. While still elevated, this forecast suggests a more optimistic outlook compared with earlier periods marked by sharper price volatility.

Expectations for inflation over longer horizons also improved. The 12-month-ahead CPI forecast, which stood at 23.35% in the previous survey, declined to 22.20% in January. This shift indicates that market actors increasingly believe price pressures will ease further over the coming year.

Similarly, 24-month-ahead inflation expectations edged lower, falling from 17.45% to 16.94%. This gradual improvement reflects expectations that tighter monetary policy, controlled domestic demand, and easing cost pressures will continue to support price stability over the medium term.

Interest Rate Outlook Signals Easing Expectations

The survey also points to a softening in interest rate expectations, aligning with the improved inflation outlook. Participants revised down their forecasts for short-term market rates, suggesting anticipation of a less restrictive financial environment ahead.

The expected overnight interest rate formed in the BIST Repo and Reverse Repo Market for the current month-end declined from 38.13% to 36.43%. This adjustment reflects changing expectations around liquidity conditions and short-term funding costs.

Looking specifically at monetary policy, participants projected the CBRT policy rate for the January Monetary Policy Committee (MPC) meeting at 36.50%. While still signaling a tight stance, this level underscores market belief that interest rates may gradually move lower as inflation trends improve, provided risks remain contained.

Dollar/TL Expectations Remain Elevated but Stable

Despite improving inflation expectations, projections for the exchange rate suggest continued caution. Market participants anticipate that currency pressures will persist, albeit without sharp disruptions.

The year-end USD/TRY forecast for the current year was set at 51.17 lira, reflecting expectations of ongoing depreciation influenced by inflation differentials, external financing needs, and global monetary conditions.

Looking further ahead, the 12-month exchange rate expectation rose slightly, from 51.08 to 51.89 lira. This modest upward revision suggests that while markets do not foresee abrupt currency shocks, they continue to price in gradual depreciation over time.

The relatively narrow range between short- and medium-term exchange rate expectations indicates that participants expect exchange rate movements to remain orderly rather than volatile, assuming policy discipline is maintained.

Growth Forecasts Hold Steady

In contrast to the adjustments seen in inflation and interest rate expectations, economic growth forecasts remained unchanged, signaling confidence in Turkey’s growth resilience despite tight financial conditions.

Participants maintained their 2026 GDP growth expectation at 3.9%, the same level recorded in the previous survey period. This projection suggests that domestic demand, exports, and investment will continue to support economic activity, even as monetary policy remains restrictive.

For 2027, growth expectations were slightly more optimistic. Market participants forecast GDP growth of 4.3%, reflecting the assumption that easing inflation and improved financial conditions could support stronger expansion in the medium term.

What the Survey Signals for the Economy

Taken together, the January 2026 Market Participants Survey paints a picture of measured optimism. Declining inflation expectations and lower projected interest rates indicate confidence in the CBRT’s policy direction, while stable growth forecasts suggest the economy will avoid a sharp slowdown.

However, elevated exchange rate projections and still-high inflation levels highlight that challenges remain. The survey results suggest that markets are closely watching policy consistency, fiscal discipline, and global financial conditions as key determinants of whether the improving trend can be sustained.

As one of the most closely followed indicators of market sentiment, the CBRT’s survey provides valuable insight into evolving expectations. For policymakers, it serves as both validation and warning: progress is being recognized, but credibility and stability remain essential to anchoring expectations over the long term.