The annual inflation expectation for the next 12 months in Türkiye increased slightly among households, while it decreased among market participants and the real sector, a fresh survey by the central bank showed on Wednesday.
Market participants see inflation a year from now at 24.6%, while the real sector projects it to be 41.1%, the Central Bank of the Republic of Türkiye's (CBRT) March sectoral inflation expectations report said. They declined by 0.7 percentage points and by 0.8 percentage points, respectively, compared to the February survey.
Household inflation expectations rose slightly by 0.1 percentage points, reaching 59.3%. The survey also showed the proportion of households expecting inflation to decrease in the next 12 months increased by 3 percentage points compared to the previous month to 31.3%.
The gap between the inflation expectations of market participants and citizens widened to 34.7 percentage points, compared to 33.9 percentage points in the prior month.
Treasury and Finance Minister Mehmet Şimşek said the survey does not fully reflect recent developments, including a major market sell-off following the arrest of Istanbul's mayor.
Police detained Mayor Ekrem Imamoğlu last Wednesday, and a court jailed him on Sunday pending trial on corruption charges, sending the Turkish lira, stocks and bonds sharply lower.
Şimşek still said that the impact of market volatility on expectations is expected to remain short-lived and limited.
"We assess that the steps taken with strong coordination among all our institutions and the tightening financial conditions will be disinflationary. We will resolutely implement our program until price stability is achieved," the minister wrote on social media platform X.
Over the last year, Türkiye has seen both inflation and interest rates heading lower as part of an orthodox economic program that promised Turks future relief after years of soaring prices.
The lira dropped briefly touched a record low of 42 against the U.S. dollar last Wednesday though later recovered most of those losses. It has since remained near 38 due to central bank steps to stabilize it.
A separate survey on Wednesday said Turkish inflation is expected to end the year a bit higher than previously expected.
Year-end inflation is seen at 29.75% based on the median forecast of nine respondents in the Reuters poll. That was up one percentage point from the previous poll, due to fallout from last week's market volatility.
The annual rate is expected to fall to 38.9% in March from February's 39.05%, the survey said. The monthly inflation rate is seen edging up to 3% based on the median, with forecasts ranging from 2.7% to 3.56%.
The central bank tightened its funding rate by 400 basis points since the mayor's arrest, data shows. It expects year-end inflation of 24% based on its February forecast.
Wall Street bank Morgan Stanley said the "front-loaded currency depreciation" will likely lift inflation readings mainly in April and May.
"Provided that FX pressures remain contained, and inflationary pressures start easing from June, the (central bank) may have room to restart cuts in June," it wrote.
Morgan Stanley also said they've revised up their end-year policy rate forecast to 33.5% from 30.5% previously.
The next central bank policy rate decision is set for April 17 when it could slow, pause or even reverse its easing cycle, analysts say. It held an unscheduled meeting last week to hike the overnight borrowing rate.
The central bank has initiated an easing cycle and cut its policy rate to 42.5% gradually in the past three scheduled meetings. Before that, since mid-2023, it raised the rate 4,150 basis points to cool inflation in a shift to more conventional policymaking, after years of low rates aimed at fostering growth.
Şimşek and CBRT Governor Fatih Karahan told investors on a call Tuesday that they expect especially the April inflation reading to be somewhat higher due to the lira's 4% depreciation, a participant said.
They see a 40% "pass-through" rate, which measures how much the depreciation lifts prices mostly via imports.
The Turkish Statistical Institute (TurkStat) will release March inflation data on April 3.
