Citi's Expectation Report on CBRT's 2026 Year-End Interest Rate

In a report prepared following the August inflation data, Citi economists announced that they do not expect the Central Bank of the Republic of Turkey to make an interest rate change in September and shared their 2026 policy rate projection.

Growth Expectations Decline While Inflation Rises

In the Citi Research report, citing data from the CBRT Market Participants Survey, it was recalled that the 2026 GDP growth expectation declined for the fifth consecutive month.

Although the year-end growth expectation was revised down from 3.84 percent to 3.1 percent, the reflection of this slowdown on the general price level remained limited.

Forward-Looking Inflation Anchor Impaired

Emphasizing the deterioration in forward-looking expectations, analysts noted that 12-month-ahead inflation expectations increased by 159 basis points to 23.69 percent.

Additionally, the fact that the 24-month-ahead expectation exceeded the 18 percent threshold for the first time since January indicated that the inflation anchor has been impaired.

August Inflation Remained Slightly Below Expectations

The Consumer Price Index materialized at an annual rate of 31.51 percent in August, coming in below consensus forecasts and Citi's own expectation.

Among the main reasons for this deviation were the moderate trend in clothing inflation and the relatively calm picture in food prices.

Core and Services Inflation Maintain High Course

It was stated that core inflation indicators maintain their high course in the annual 30 percent band, while services inflation hovers around 40 percent.

Seasonally adjusted data revealed that there is no significant improvement in the main inflation momentum.

No Interest Rate Change Expected for September MPC Meeting

It was argued that current price developments point to a more challenging process than the picture in the CBRT's latest Inflation Report.

In this context, analysts of the financial institution stated that no change in interest rates is expected at the Monetary Policy Committee meeting in September.

2026 Year-End Policy Rate Forecast at 35 Percent

Evaluating that the room for interest rate cuts in the second half is quite limited, it was projected that the policy rate will complete 2026 at the 35 percent level.

Inflation, on the other hand, is expected to complete the year slightly above the 30.9 percent level at the end of 2025.