August inflation report and CBRT interest rate forecast from Citi economists
A report prepared by Citi economists emphasized that the slowdown in domestic demand has not contributed sufficiently to disinflation and that expectations have deteriorated.
Citi economists İlker Domaç and Gültekin Işıklar published a comprehensive evaluation report following the August inflation data, sharing CBRT policies and year-end expectations.
Evaluations Following August Inflation
In August, annual CPI came in at 31.51 percent, slightly below the consensus expectation. The main reason for this deviation was the calm trend in clothing and food prices.
However, core inflation remained high at around 30 percent and services inflation at around 40 percent.
Weakening in Domestic Demand and Structural Pressures
It was pointed out that the weakening in domestic demand has not yet made a meaningful contribution to the disinflation process.
It was stated that current price developments show that shocks are not temporary, but rather supply-driven and structural in nature.
Deterioration in Forward-Looking Inflation Expectations
Since the trough in February, 12-month-ahead inflation expectations have increased by 159 basis points to 23.69 percent.
The fact that 24-month-ahead expectations exceeded the 18 percent threshold indicated that the inflation anchor has been damaged.
Continuous Decline in Growth Expectations
According to CBRT Market Participants Survey data, the 2026 GDP growth expectation declined for the fifth consecutive month.
Although the year-end growth expectation, which was 3.84 percent in March, was revised down to 3.1 percent, this slowdown had a limited reflection on prices.
CBRT Monetary Policy and Year-End Interest Rate Forecasts
Citi economists do not expect any change in the policy rate at the Monetary Policy Committee meeting in September.
Emphasizing that the room for interest rate cuts in the second half of the year is limited, they project that the policy rate will close 2026 at 35 percent.