BofA raises Turkey's inflation forecast.

Bank of America (BofA) has revised its inflation forecast for the Turkish economy upwards for 2025, raising its year-end inflation estimate from 25.7% to 28.1%. Additionally, the bank increased its year-end policy interest rate expectation from 30.5% to 32.5%. The report highlights that recent political uncertainties in Turkey have caused market fluctuations, but if these uncertainties diminish, the inflationary impact could be limited, directly affecting the Central Bank of the Republic of Turkey’s (TCMB) policy decisions and reducing market risk perception.

The report also notes a significant decline in TCMB's net foreign exchange position, which has decreased by approximately $21-23 billion in the last three days, largely due to foreign investors reducing their currency positions. BofA anticipates that the decline in foreign exchange reserves may be linked to the TCMB's interventions aimed at maintaining market stability, suggesting that the bank could continue currency sales to provide liquidity against market volatility.