Economy
Markets price in July rate cut as Türkiye inflation outlook improves
Inflation in Türkiye is projected to drop below 30% by the end of the year, while the country’s central bank is expected to return to rate cuts as of next month, a latest survey showed on Monday.
Markets are forecasting inflation cooling to 29.86% by the end of 2025, according to the Survey of Market Participants for June by the Central Bank of the Republic of Türkiye (CBRT).
That is down from 30.35% in the previous month’s survey.
Aggressive monetary tightening since mid-2023, combined with favorable energy prices, has helped reduce Türkiye’s annual inflation rate by half over the past year.
The inflation lastly dipped to 35.4% in May, compared to around 75% a year ago.
The central bank has repeatedly cited expectations as one factor determining the course of its monetary policy.
The bank last month maintained its year-end mid-point estimate for the consumer price index (CPI) at 24%, with an upper band of 29%. Turkish officials continue to emphasize that inflation will remain within this forecast band.
Treasury and Finance Minister Mehmet Şimşek on Thursday cited stickiness in services inflation, which he said was preventing further improvement in headline CPI.
Still, Şimşek said inflation could end the year in the 20s, stressing a steep fall in basic goods prices.
The CBRT pivoted to raising its key policy rate by 350 basis points this April to 46% and pushed the overnight lending rate to 49% after Turkish assets and the lira fell sharply after Istanbul Mayor Ekrem Imamoğlu was jailed pending trial over graft charges.
Before that, the bank had begun an easing cycle and gradually cut its one-week repo rate to 42.5% in March as inflation fell from the level of more than 75% that it reached in May 2024.
The sharper-than-anticipated slowdown in inflation last month has reignited speculation that the bank could resume rate cuts soon.
Markets see inflation 12 months from now falling to 24.56%, the CBRT survey showed. That is down from 25.06% in the previous survey.
The 24-month-ahead forecast eased to 17.35%, down from 17.77%, the bank said.
Market participants expect the central bank to keep its benchmark one-week repo rate unchanged this Thursday but project a three percentage point cut in July.
They see the rate falling to around 40% in September before ending the year at around 36%. A year from now, the key policy rate is estimated to be around 29%.
Survey participants now expect the lira/dollar exchange rate to be 43.57 by the end of 2024, slightly below the previous forecast of 43.70.
However, the 12-month ahead forecast for the exchange rate increased to 47.04, up from 46.62 in the last survey period.
The Survey of Market Participants is conducted monthly. The panel consists of 72 participants, 54 of whom are experts in the financial sector and 18 of whom are experts in the real sector.
This week’s release of the first quarterly inflation report of 2026 by the Central Bank of the Republic of Türkiye (CBRT) is expected to serve as an early test of the country’s disinflation drive.
Analysts broadly expect policymakers to revise their year-end inflation forecasts upward, but markets will also be looking at potential clues on the interest rate path for the coming months.
Annual consumer price growth has continued to ease steadily, though monthly volatility has persisted. That is seen as one of the factors behind the central bank’s more cautious easing cycle.
Some officials and analysts now say policymakers may need to either slow the pace of rate cuts that began more than a year ago or tolerate a slower rate of disinflation. Most expect a combination of both.
Authorities have been pursuing a more than 2.5-year effort to curb inflation, which has gradually fallen to around 30% as of last month, after peaking near 75% in mid-2024.
Vice President Cevdet Yılmaz said on Saturday that Türkiye’s tight and disciplined monetary and fiscal policies were vital but “not enough,” stressing that supply-side policies could also help to tame annual inflation that had risen as high as 75% in mid-2024.
Yılmaz said the 45-point fall in inflation since May 2024 was not enough, adding the government was on a path to further lower consumer prices.
“We will maintain our tight monetary policy, we will keep our disciplined fiscal policies, we are determined to do this. But these are not enough either. On the other hand, we have to contribute to our battle with inflation through our supply-side policies,” he added.
Lifting forecasts
Attention will turn to Thursday’s inflation report, where Governor Fatih Karahan is widely expected to raise the bank’s year-end forecast from the current 13%-19% range.
Karahan could even nudge the bank’s interim end-2026 target up from 16%, though that move is less certain, given that the target is meant to remain largely fixed in order to guide policy expectations, the analysts say.
Last month, consumer price inflation surged nearly 5% month-over-month, a higher-than-expected uptick that officials attributed to “seasonal factors” and one-off adjustments.
It is expected to slow to around 3% this month.
Easing cyle
Monetary policy easing has zig-zagged since the central bank first cut its key interest rate from 50% in late 2024.
Nearly a year ago, it briefly reversed course due to market volatility, and has since slashed rates by 300 basis points, then 250, 100, 150, and again by 100 points to 37% last month.
Having already slowed its easing, the central bank warned last month about risks to the disinflation process and said it would tighten policy if there were a “significant deviation in inflation outlook from the interim targets.”
Some analysts predict the central bank may need to pause the cuts, possibly as soon as its next rate decision in March, to avoid this deviation.
Wall Street bank JPMorgan raised its year-end consumer price index (CPI) forecast to 24% from 23% and predicted a series of 100-point cuts this year, with the chance of a smaller easing in March due to restaurant and food price pressure during the Muslim holy month of Ramadan.
A Republican lawmaker has called on U.S. Commerce Secretary Howard Lutnick to step down over his alleged links to convicted sex offender Jeffrey Epstein, citing newly released court files as the saga over high-profile ties to disgraced financier deepens.
Representative Thomas Massie told broadcaster CNN in an interview published on Sunday that the documents suggest Lutnick visited Epstein’s private Caribbean island and maintained business ties with him years after Epstein pleaded guilty to child prostitution charges in 2008.
“He’s got a lot to answer for, but really, he should make life easier on (U.S. President Donald Trump), frankly, and just resign,” Massie said.
Epstein, who ran a long-running sexual abuse operation involving young women and minors, died by suicide in jail in 2019 while awaiting further prosecution. Lutnick is mentioned repeatedly in the recently unsealed Epstein files, though inclusion in the records does not in itself indicate wrongdoing.
U.S. media, citing emails contained in the documents, reported that Lutnick and his family planned a visit to Epstein’s island, Little St. James, in 2012, with a follow-up message suggesting the trip may have taken place. The island has previously been described as the center of Epstein’s abuse network.
According to The New York Times, Lutnick and Epstein, who were neighbors in New York, invested in the same private company, while CBS News said the two appeared to have business dealings after Epstein became a known sex offender.
Lutnick had said in a podcast last year that he decided in 2005 never to be in the same room again with Epstein, whom he called a “disgusting person.”
The New York Times reported that Lutnick said in a brief phone call last week that he had spent “zero time” with Epstein.
Türkiye has remained economically resilient despite mounting global uncertainty, underpinned by free trade agreements, strong service exports and an ongoing reform agenda, Finance Minister Mehmet Şimşek said on Monday.
Şimşek, speaking at the Conference for Emerging Market Economies in Saudi Arabia, described last year as a challenging period for the global economy marked by “volatility, uncertainty, complexity, and ambiguity.”
“It’s been a difficult year with heightened uncertainty, in particular for emerging markets,” he said.
Şimşek said Türkiye is relatively resilient to global trade fragmentation, noting that about 62% of its exports are covered by the EU Customs Union and free trade pacts with 27 countries.
While not fully immune, these agreements provide partial protection, and the rest of trade is largely concentrated in nearby regions such as the Middle East, North Africa, and Central Asia.
He said Türkiye ranks among the world’s top 20 in services trade, highlighting its position as fourth in tourism and a global leader in construction and TV series exports. He stressed that services have so far been less affected by protectionism than goods, giving Türkiye an edge, and said the government is prioritizing the sector for its high added value and job creation potential.
Şimşek says Türkiye also prioritizes and invests in the field of artificial intelligence, and stated that along with infrastructure investments, they attach importance to the human capital dimension, skills development, and education.
Şimşek explained that they are also focusing on regional integration, stating that connectivity is a part of this, and that they are building new corridors.
He said Türkiye sits on the Middle Corridor from Beijing to London and is working on new routes linking the Gulf to global markets via Türkiye, adding that boosting connectivity is central to the strategy, alongside energy investments, including plans to build two or three additional nuclear power plants in the coming decades to meet rising demand driven by AI.
Andrew Mountbatten-Windsor, the younger brother of King Charles, shared confidential British trade documents with Jeffrey Epstein in 2010, leaking information to the late sex offender during his tenure as a government envoy, emails appear to show.
The former prince, 65, has faced years of scrutiny over his friendship with Epstein, a relationship that has cost him his role in the royal family, titles and home. Andrew has always denied any wrongdoing and not responded to requests for comment since the latest release of Epstein files.
In the latest batch of files released in the U.S., emails appear to show that Andrew forwarded to Epstein reports about Vietnam, Singapore and other places, which he had been sent in relation to a trip he made in an official capacity.
It was not immediately clear whether authorities were planning to open an investigation into Andrew’s sharing of information.
Trade envoys are usually barred from sharing sensitive or commercial documents under confidentiality rules.
Over the last 10 days, revelations from the Epstein files have engulfed British Prime Minister Keir Starmer in the biggest crisis of his premiership, after he appointed an acquaintance of Epstein, Peter Mandelson, as ambassador to the United States.
Like Andrew, it appears that Mandelson also shared sensitive government files from 2009 and 2010 with Epstein, and police are investigating claims of misconduct in public office.
Thames Valley Police said last week they were reviewing a new allegation against Andrew involving a woman being taken to an address in Windsor in light of the latest Epstein files.
Mountbatten-Windsor, the second son of the late Queen Elizabeth, was forced to quit all official royal duties in 2019 and, last October, Charles removed his title of prince. Andrew was moved out of his royal mansion last week.
British government bond yields surged early on Monday as investors continued to weigh the political future of Prime Minister Keir Starmer amid the fallout from the Epstein crisis, although they later eased to move more in line with U.S. Treasuries.
Starmer’s chief of staff, Morgan McSweeney, quit on Sunday, saying he took responsibility for advising Starmer to appoint Peter Mandelson as ambassador to the U.S. despite his known links to Jeffrey Epstein.
Some in Starmer’s Labor Party are openly questioning his judgment and his future, and investors are increasingly bracing for a challenge to his leadership, raising uncertainty over the path of British fiscal policy.
On Monday, Starmer’s director of communications, Tim Allan, also resigned.
The 10-year gilt yield rose to a high of 4.554% at 08:21 a.m. GMT, up 4 basis points on the day, before easing to 4.533%, in line with a rise in 10-year U.S. Treasuries. Long-dated gilt yields, most sensitive to worries over the budget outlook, rose by similar amounts.
“The decision by his most senior adviser to fall on his sword may buy Starmer some time, but signs of widespread discontent on the backbench, compounded by diabolically bad poll results, are creating the impression that his days are numbered,” said Benjamin Picton, senior market strategist at Rabobank.
On Feb. 5, when there was a previous bout of concerns about Starmer’s future, 10-year gilt yields rose to their highest since Nov. 20 at 4.605% before retreating sharply after the Bank of England (BoE) came closer than expected to cutting interest rates in that day’s decision.
However, gilt auctions in recent weeks have shown exceptionally strong levels of demand. The sale of a five-year gilt due on Tuesday will provide the next test of investor appetite. Economic growth data on Thursday could also move the market.
Türkiye has decided to suspend chicken meat exports ahead of the Muslim holy month of Ramadan in a bid to stabilize domestic prices and prevent what authorities described as unjustified increases that could strain consumers.
The decision came after domestic poultry producers and sellers raised prices by as much as 15% before Ramadan, prompting the government to intervene to protect the domestic market.
The Trade Ministry said the decision aimed to support the supply-demand balance and curb volatility in food prices.
Ramadan is a month when Muslims are united in a ritual of daily fasting from dawn to sunset. This year’s Ramadan is due to start next week.
For Muslims, it’s a time of increased worship, religious reflection, charity and good deeds. Socially, it often brings families and friends together in festive gatherings around meals to break their fast.
Türkiye frequently takes temporary trade measures ahead of Ramadan, when food demand typically rises, to contain inflation and ensure a stable supply of essential goods.
Annual inflation in Türkiye has been gradually easing and lastly dipped to 30.65% in January. Still, food has been one of the main contributors to rising prices.
In a statement, the Trade Ministry said recent regional developments affecting food markets, combined with rising domestic demand and seasonal shifts in consumption patterns, have accelerated price movements in certain product groups, including poultry.
“Price developments in the poultry meat market have been closely monitored, and it has been carefully assessed whether price formation has remained within the framework of normal market conditions,” the ministry said.
“Within this framework, as a step to support the supply-demand balance in the market, measures to suspend poultry meat exports have been implemented as of today.”
The ministry added that “any practice or speculative pricing behavior that could victimize our consumers or disrupt market mechanisms through exorbitant price exploitation is being closely monitored,” noting that the necessary inspection and sanction processes were being carried out with “determination.”
Ramadan is the ninth month of the Islamic lunar calendar; the month cycles through the seasons.
The start of the month traditionally depends on the sighting of the crescent moon. This year, the first day is expected to be on Feb. 19.
Fasting is one of the Five Pillars of Islam, along with the profession of faith, prayer, almsgiving and pilgrimage.
Muslims see various meanings and lessons in observing the fast.
It’s regarded as an act of worship to attain God-conscious piety and one of submission to God. The devout see benefits, including practicing self-restraint, growing closer to God, cultivating gratitude and empathizing with people who are poor and hungry.
The daily fast in Ramadan includes abstaining from all food and drink – not even a sip of water is allowed – from dawn to sunset before breaking the fast in a meal known as “iftar” in Arabic.
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