Turkey’s central bank is expected to restart its easing cycle, with a 100 basis point cut taking the policy rate to 36.00%, followed by further 100bp moves in October and December that would leave it at 35% by year-end. The outlook leans on improved inflation sentiment after benign September data, while developments linked to investment funds are framed as a downside risk to the economy in the final quarter. Year-end inflation is forecast at 29.0%.
Domestic Demand and Economic Risks
Risks centre on domestic demand, with tighter liquidity, wealth effects and softer confidence seen as potential drags, even if repayments to smaller savers provide some offset to consumption; counterparty exposures are cited as the main channel for spillovers.
Carry Trades and FX Outlook
Despite crowded long TRY positioning and a reduced carry pick-up, demand for carry trades is expected to persist across emerging markets. The broader FX set-up is viewed as intact after a weekly adjustment, with USD/TRY projected at 51.50 by end-2025.
