CBT’s latest survey shows market participants holding a 23.2% inflation forecast for end-2026; this compares with 23.4% a month ago. It appears that inflation expectations may be softening slightly just as current inflation is softening, but it appears to be levelling off at c.23%, Commerzbank's FX analyst Tatha Ghose notes.

USD/TRY grinds higher as inflation persists

"Forecasts further down the line – for example, for 24‑months ahead – are typically wholly unreliable; they follow a lazy pattern of approaching the CB target eventually (although this never happens in practice). In other words, the 23% is a more ‘active’ forecast – akin to a terminal rate which the market foresees at present. It is also the inflation rate one may calculate by annualizing from recent month-on-month price change."

"What this means is that fresh price increases every month – after all these quarters of high interest rates – are continuing at a pace which is inconsistent with CBT’s mid-term targets. This is what we had warned about since the past year: that it might be easy to get the inflation rate down from 60% or 80% to 25% – because that 60% or 80% peak was a result of several covid-era one-offs – but the path to ‘true’ inflation targeting remains as elusive as ever. The same survey also shows the market anticipating 150bp rate cuts this month and again in March."

"USD/TRY continues to creep up steadily on a daily basis."