In the CBRT May Expectation Survey, market participants’ current year-end inflation expectation was 13.18%. When we look at short term inflation expectations; May inflation is expected to be 1.27%, June inflation 0.87% and July inflation 0.69%. If inflation increases in line with the expectations in these months, annual inflation in May, June and July will be 17.03%, 16.73% and 16.85%, respectively.
Although April inflation is assumed to be the highest this year in the baseline scenario, there may be an upward pressure on the main metrics of inflation. The base effect seems to be the only factor that can positively affect inflation in this period. The inflation-increasing effect of global commodity prices and exchange rate increases will cause cumulative increases coming from the past. In this case, the reflection effect of possible additional increases in commodity prices and exchange rates may have to be within the assumptions of the upcoming period of inflation. This indicates that the base effect may have a periodic effect on inflation, and the inflation decline may be limited. While it is not certain whether inflation will reach a new peak after April, high inflationary pressure will be seen in the next few months.
According to the average inflation forecasts for 12 and 24 months ahead, inflation is expected to be at 11.81% and 9.99%, respectively. Thus, the average of inflation expectations for 12 and 24 months ahead became 10.9%.
The WACF expectations for the end of the month were 19% as a result of the CBRT’s tight stance and the 6 May MPC’s expectation of no change in interest rates. Interest rate expectations in the Repo and Reverse Repo Market decreased from 19.03% to 19% for the end of the month. While there is a change from 15.52% to 15.63% in the 5-year GDBS interest rate expectations after 12 months, it is expected that the 10-year GDBS interest rates will be at the level of 15.55% after 12 months. In the previous forecast period, this expectation was at the level of 15.49%. The market predicts the 1-week repo rate, which is the policy rate of the Central Bank, as 19%, 18.24, 16.58, 14.13 and 11.55, respectively, for the current month and for the 3, 6, 12, 24 months ahead expectations.
In an environment where the upward outlook for inflation continues and the policy rate is set above inflation, we do not expect any change regarding the interest rate decision of the Central Bank on May 6. The current outlook of inflation, which rose to 17.1% in April, and a few significant risks in the coming months pose an obstacle to the Central Bank’s easing. Although the Central Bank raised its year-end expectation to 12.2% in the latest Inflation Report, it still stands at an optimistic point compared to the general expectations of market participants. On the other hand, despite the commitment to apply interest rates on inflation, the Central Bank’s assessment of April inflation as a peak in the base scenario shows that it does not think that additional tightening will be needed in the coming months.
We do not see much change in growth expectations. It is seen that the 2021 GDP expectation, which was 4.3% growth in the previous survey period, remains the same. The forecast for 2022 was 4.1% growth in the May survey period. Although the capacity of the economy to operate is strong in the first months of the year, we will be able to see periodic slowdowns due to the rise of Covid cases and the measures taken. As foreign demand continues abroad, the contribution of net exports to growth may be more positive. Over the year, the GDP growth outlook for 2Q21 will also see a significant base effect from last year.
Exchange rate expectations were 8.71 for the end of 2021. We see that the exchange rate expectations for 12 months ahead are 8.95.
Kaynak Tera Yatırım
Hibya Haber Ajansı
Kaynak: Hibya Haber Ajansı
