The inflation report of the Central Bank (CBRT) will be announced at 10.30 today. Markets expect the CBRT to make a limited upward revision in inflation forecasts. In addition to inflation forecasts, messages on monetary and exchange rate policy, reserve development, KKM and TL liquidity will also be followed closely.
Dollar TL started the day just above 30.6, close to its historical peak, continuing the gradual upward trend that has been continuing since September 2023. According to these data, TL lost 2.7 percent of its value against the dollar in January. The loss of TL against the dollar since the beginning of the year has been 3.5 percent. Euro TL broke a record in Forex markets with 33.11.
CBRT will also announce weekly money, bank, foreign exchange reserve and securities movements data at 14.30 today.
According to bankers’ calculations last week, the CBRT’s gross reserves will decrease by approximately 1.5 billion dollars to 135.5 billion dollars. It shows that the net reserve will decrease by approximately 2.5 billion dollars last week to 28 billion dollars, and the net reserve excluding swaps will decrease by 1 billion dollars to minus 44.5 billion dollars.
Since AKP President Recep Tayyip Erdoğan dismissed CBRT presidents in the past due to interest rate increase decisions, the markets questioned the presidential change in the CBRT over the weekend, but this was short-lived. The market quickly agreed that the presidential change would not bring a meaningful change in economic policies, especially the statements of Treasury and Finance Minister Mehmet Şimşek.
However, following the inflation data for January and the presidential change, the first report of the year began to be watched more closely. At this meeting, Karahan will appear before the public for the first time as president. Investors will also monitor whether higher inflation will have a new impact on monetary policy and forecast revisions.
“WE ARE DETERMINED TO MAINTAIN MONETARY TIGHTNESS”
Karahan, who was appointed at the weekend, gave a message of determination in disinflation in his first statement, saying, “We are determined to maintain the necessary monetary tightness until inflation drops to levels compatible with our target.” Stating that they follow inflation expectations and pricing behavior closely, Karahan said that he will “absolutely” not allow any deterioration in the inflation outlook.
In its inflation report three months ago, the Central Bank stated that the CPI would be between 30 percent and 42 percent at the end of 2024, with a midpoint of 36 percent; He predicted that it would drop to 14 percent by the end of 2025 and stabilize by converging to the 5 percent target in the medium term. Year-end market estimates for CPI are close to 45 percent.
A bank’s Treasury processor said, “The general expectation is that inflation will decline towards 45 percent after peaking at just over 75 percent in May. Therefore, we expect to see a limited upward revision in the 36 percent forecast from the CBRT,” and added:
“In this context, we will closely follow the main messages in the report on issues such as upward revisions in forecasts, monetary policy, exchange rate policy, reserves, liquidity, exchange rate protected deposits.”
While the Consumer Price Index (CPI) showed a significant monthly increase of 6.7 percent in January, with effects that the economic management described as temporary, the market will monitor whether the annual inflation at 64.86 percent will have an effect such as a new interest rate increase or keeping interest rates higher for a longer period of time.