Türkiye to maintain tight monetary policy, expert says

Türkiye's economic administration is expected to maintain its tight monetary stance, with the Central Bank's upcoming inflation report likely reinforcing this policy direction as the country progresses on its disinflation path. Zumrut Imamoglu, Senior Türkiye Economist at financial institution Nomura, emphasized that despite a slightly delayed trajectory, the overall strategy aims for an economic soft landing.

Inflation Outlook and Revisions

Imamoglu noted that October's annual inflation rate of 32.87% came in below market forecasts. However, unexpected factors including severe spring frosts and summer droughts significantly pushed food prices beyond projections. Nomura anticipates year-end inflation around 31.2%, with a potential to dip below 30% excluding these climate-related shocks. "The disinflation continues slower than we expected, but it is indeed happening," Imamoglu stated, attributing the delay to a confluence of political, global, and climate issues.

Policy Direction and Future Projections

The Central Bank's report, due November 7, may feature upward revisions to its inflation forecasts. While its existing 2025 forecast is 25-29%, Imamoglu suggested it could be adjusted to a 28-32% range. The 2026 estimate might be set between 13% and 19%. "We expect that the bank will signal that its tight stance will continue," she said, underscoring the administration's commitment to a soft landing without pushing the economy into a recession. Nomura forecasts a year-end policy rate of 28% for 2026.

Investor Sentiment and Long-term Goals

Imamoglu highlighted that foreign investors are monitoring the market for opportunities, particularly for long-term lira-denominated debt. Recent data shows foreign investor positions at around 6.5%, with potential for growth as inflation decelerates. She affirmed the effectiveness of the current policy, stating, "The current policy direction will lead Türkiye to lower inflation... and lowering inflation to lower levels will be key in ensuring that growth is permanent, long-term, and sustainable."