Why are global banks more optimistic about Türkiye’s inflation than its citizens?

International finance institutions have revised their inflation forecasts for Türkiye following a June inflation slowdown.

These forecasts reflect a cautious optimism among international finance institutions regarding Türkiye’s inflation trajectory, driven by recent economic measures and a more favorable macroeconomic environment.

Türkiye’s June inflation rate

According to Türkiye’s statistical bureau, the Consumer Price Index (CPI) increased by 1.64% and the Domestic Producer Price Index (D-PPI) by 1.38% month-on-month in June. This marks a deceleration from May’s figures, where CPI was 3.37%.

J.P. Morgan

U.S. investment bank J.P. Morgan has adjusted its inflation forecast for Türkiye, lowering it from 43.5% to 42.5% for the end of 2024, and from 25.2% to 25% for the end of 2025.

A report from the bank noted that disinflation began in June and is expected to accelerate in the coming months.

Goldman Sachs

Goldman Sachs, another U.S.-based investment bank, predicted a temporary acceleration in inflation in July because of regulatory changes and normalization in core CPI. However, the bank anticipates inflation to continue weakening in the second half of the year, projecting a decline to 36% by year-end.

The report also suggested that the Central Bank of the Republic of Türkiye (CBRT) might consider easing monetary policy and introducing an interest rate cut by the end of the third quarter, influenced by the appreciation of the Turkish lira and the overall slowdown in inflation.

Morgan Stanley

Morgan Stanley revised its inflation forecast for Türkiye from 43.4% to 42.4% for the end of the year, maintaining a 25.2% forecast for the end of 2025.

The bank highlighted the unexpectedly fast start to disinflation, driven by tight monetary policy, but cautioned that the CBRT might maintain its tight stance because of ongoing risks, including high services inflation and managed price increases.

Barclays

U.K.-based Barclays lowered its year-end inflation forecast for Türkiye from 44.5% to 44%, with a 2025 forecast of 30.8%. The bank noted that a high base effect could contribute to a further slowdown in inflation in July and August.

Barclays indicated the CBRT might initiate its first interest rate cut in January, or potentially in the fourth quarter of this year.

HSBC

HSBC, headquartered in London, remarked that the suppression of inflation has enhanced the appeal of the Turkish lira through high real interest rates.

The bank’s report stated that June’s inflation figures were positive for CBRT.

UBS

Swiss investment bank UBS forecasted that Türkiye’s annual inflation could fall below 50% by August, estimating a year-end rate of 45%.

The report highlighted positive developments such as the lack of a minimum wage increase and the slowdown in credit growth, suggesting these factors could provide the Central Bank with an opportunity to cut interest rates in the fourth quarter.