Foreign predictions for Turkiye: Year-end inflation expectations revealed

Strigo recently commented on their investments in Turkish lira-denominated bonds and the developments in Turkiye's economy.

“Our approach to Turkish assets remains positive,” Strigo noted, adding that they have confidence in the current economic policies and the team implementing them.

Strigo mentioned that in Turkiye, Turkish lira and shorter-term local bonds are particularly attractive, noting that the yield curve has largely inverted.

"Turkish Assets Are Attractive"

Strigo explained that while short-term positions provide significant returns for investors, the long-term yield curve has also improved significantly. He stated, "We need to see signs of a significant drop in inflation to increase our investments in this area. Inflation has already decreased more than expected. As inflation declines, we will need to see if the long-term yield curve becomes more attractive. Currently, our view on investing in Turkish assets is more medium-term. We find Turkish assets, especially the Turkish lira, to be appealing."

Strigo mentioned that they plan to maintain these positions for the next few months, continuing:

"The attractiveness of financial returns allows us to maintain a medium-term outlook of 6 to 12 months. When we invested in the Turkish lira, we had this timeframe in mind, and our view has not changed. If we see more favorable macroeconomic data, we could indeed increase our investments in Turkish assets within the same timeframe. On the other hand, if we bought a one-year bond, it doesn't mean we will exit Turkiye entirely after a year, as we might purchase another one-year bond. This is an instrument choice, and our current view is medium-term. This means our investments will remain in the country for a while longer. The increase in our investment duration depends on the continuation of market-friendly macroeconomic policies, which we are currently very pleased with."

Reform Continuity and Economic Outlook

Strigo emphasized that as reforms continue and macroeconomic indicators like inflation improve, their views on the Turkish economy and Turkish assets will remain constructive. "Clearly, we have seen significant credit rating upgrades recently, and we believe more will follow," he added.

"I Don't Think the Market Will Panic"

Regarding the Central Bank of the Republic of Turkiye's (CBRT) policy interest rate decisions, Strigo expressed his expectations. He noted that an early reduction in the policy rate could cause concern, but emphasized that the CBRT has been very cautious in managing potential interest rate cuts.

Strigo said, "If the sharp decline in inflation continues, the CBRT will have room to reduce the interest rate from its current high level. When the CBRT finds this space, I don't think the market will panic due to a rate cut."

He anticipates that the CBRT's monetary policy decisions will be data-dependent, stating:

"It's hard to say how much and when this will happen. If we start to see a significant downward trend in inflation, as the markets expect, it is possible for inflation figures to decrease a bit more next year. This will also depend on the global economy and many other factors."

Year-End Inflation Expectations

According to Amundi's analysis, inflation in Turkiye is expected to drop to around 50% in July and August. Following this decline, the disinflation process is expected to moderate, with year-end inflation projected to fall within the range of 40% to 45%.