JPMorgan raises Türkiye’s inflation forecast amid currency volatility

JPMorgan has raised its year-end inflation forecast for Türkiye following recent market fluctuations, citing a slower-than-expected disinflation process.

The revision comes as the Turkish lira experienced volatility after the detention of Istanbul Mayor Ekrem Imamoglu.

In a report published by JPMorgan economist Fatih Akcelik, the financial institution adjusted its inflation expectations, increasing its 2025 year-end projection from 27.2% to 29.5%.

The bank also raised its March inflation forecast from 2.3% to 3.2%.

Interest rate projections adjusted

JPMorgan’s report anticipates that the Central Bank of the Republic of Türkiye (CBRT) will begin cutting interest rates in April, with a projected 150 basis-point reduction at each monetary policy meeting.

The bank now expects Türkiye’s year-end interest rate to be 35%, up from the previous estimate of 30%.

These changes reflect concerns that the inflationary trend in Türkiye may persist longer than previously anticipated, requiring adjustments in monetary policy expectations.

Foreign investment and currency market dynamics

The report also provided an overview of foreign investor positions in Turkish assets:

• Carry trade positions in the Turkish lira total $35 billion.
• Foreign ownership in Turkish government bonds stands at $19.6 billion.
• The share of foreign investors in the Turkish stock market is 37%, valued at $34.5 billion.

The Turkish lira has been under pressure amid rising geopolitical risks and domestic political developments, contributing to heightened uncertainty in financial markets.

Market outlook and policy considerations

JPMorgan’s revised projections suggest a cautious approach toward Türkiye’s economic outlook, with inflationary pressures expected to persist in the near term.

The firm emphasized that global economic conditions, domestic policy adjustments, and investor sentiment will play critical roles in shaping Türkiye’s financial landscape in the coming months.