Macroeconomic Evaluation

1. Global Macroeconomic Outlook

The global macroeconomic picture at the end of the third quarter of 2026 points to a balance that can be summarized as "moderate growth + persistent inflation". This combination creates a backdrop that narrows the scope for central banks to cut interest rates, thus keeping global liquidity conditions relatively tight.

In the US, annual consumer inflation is at 3.4% and flat compared to the previous month; monthly inflation has risen from 0.1% to 0.4%. Although core inflation has fallen to 2.4%, the Fed-closely watched PCE deflator is at 4% annually, with core PCE at 3.3%. The producer prices front is more striking: annual PPI has risen from 27.95% to 5.4%. This shows that pressure from the cost channel has not yet subsided. In contrast, the growth side is resilient: annual growth at 2.1%, non-farm employment increase of 162 thousand people well above expectations (56 thousand), unemployment rate stable at 4.1%. Retail sales increased by 0.2% monthly, services PMI at 55.4 in expansion territory. However, a notable signal is the jump in 1-year inflation expectations from 4.0% to 4.6%; this, for anchoring expectations, is a development that ties the Fed's hands. Indeed, while keeping the policy rate at 4.0%, interest rate projections have been revised upward: 1-year projection from 3.6% to 4.1%, 2-year projection from 3.4% to 3.9%. This means the rate cut path priced in by the market has been narrowed by the official projections.

In the Eurozone, the picture is somewhat softer. Annual inflation at 3.2%, core inflation at 2.4%; ECB policy rate stable at 2.65%. Growth at 0.6% quarterly, 1.2% annually, exceeding expectations; however, retail sales fell by 0.6% monthly and consumer confidence weak at -16.5 points. Unemployment at 8.3%. The rise in Eurozone PPI to 5.8% annually shows that energy-driven cost pressures are also alive in Europe.

A critical indicator for global liquidity is US bond yields: 30-year yield at 5.57%, 5-year at 5.06 and trending upward. Such high long-term yields are the fundamental mechanism limiting capital flows to emerging markets, as when the risk-free return is this high, investors demand additional risk premium. The DXY staying strong at 101.14 also supports this picture.

2. Turkey's Macroeconomic Outlook

In Turkey, the disinflation process continues but is still in early stages. Annual TURKSTAT inflation has fallen from 31.51% to 31.51%; monthly inflation at 1.84% slightly below expectations (1.93). Annual PPI at 27.95%, monthly PPI has risen from 2.57% to 2.57% — this indicates that the pass-through pressure from producer costs to consumer prices continues. The narrowing of the PPI-TURKSTAT spread is an indicator to watch for the maturation of disinflation.

CBRT policy rate stable at 37.0%. With inflation at 31.51%, a policy rate of 37% means positive but limited real interest rates; this shows that the "tight stance" leg of the disinflation program is maintained. On the growth side, annual 2.3% realization is below expectations (2.9); although quarterly growth at 1.1% signals recovery, industrial production falling by 1.0% monthly and at -0.32% annually confirms the cooling effect of tight monetary policy on the real economy. Unemployment rate at 8.3%; labor force participation fell from 52.9% to 52.5%. Capacity utilization rate slightly increased to 74.2, business confidence at 102.0 points above threshold. Consumer confidence rose to 91.9 but still below 100 — that is, below the optimism threshold.

In summary, Turkey is in the midst of a classic disinflation path: demand is cooling, growth is below potential, inflation is falling slowly but steadily.

3. Domestic Demand, Credit and Liquidity

The Turkey leg of the monetary transmission mechanism is clearly visible in the data. With policy rate at 37.0%, deposit rate at 43.94 (previous 46.07), consumer credit rate at 63.74 (previous 63.11). This trio shows that the transmission chain is working: the policy rate determines banks' funding costs, which add risk premium and margin to form the lending rate. The consumer credit rate being approximately 27 points above the policy rate reflects both the credit risk premium and the macroprudential framework keeping the credit channel tight.

Credit growth has slightly decreased from 36.6% to 36.6% (previous 37.08); M3 money supply growth has slowed from 2.3% to 29.3%. Although nominal credit growth appears at 36.6%, with inflation at 31.51%, real credit growth corresponds to a single-digit low level — that is, credit expansion has nearly halted in real terms. The slowdown in M3 is evidence that monetary tightening has reached domestic demand through the liquidity channel.

Domestic demand indicators confirm this mechanism: retail sales slowed from 10.4% to 10.4% annually, monthly increase fell from 0.2% to 0.2%. Against a consumer credit cost of 63.74%, the contraction in credit consumption is the expected and desired outcome; this is the demand management leg of the disinflation program.

4. Global Risk Appetite and Interest Rate Expectations

Risk appetite indicators paint a mixed picture. The VIX index has risen from 15.93 to 15.93 (7.13% increase) — although the absolute level is still low, the direction is upward. DXY strong at 101.14; US 30-year bond yield up to 5.57%, 5-year yield to 5.06. This combination — strong dollar, rising long-term US yields, increasing volatility — is a classic "external conditions tightening" signal for emerging markets.

The upward revision of the Fed's interest rate projections (1-year 4.1%, 2-year 3.9) is the fundamental basis for this picture. While the market expects faster rate cuts, the Fed's "higher for longer" message is pushing global bond yields higher and increasing the discount rate for emerging market assets. The BIST 100 losing -2.38% and BIST 30 -1.87 on September 28 may reflect this global factor as well as valuation pressure from the high interest rate environment at home. Gold falling -3.55% on an ounce basis is also consistent with a strong dollar and rising real yields.

5. Budget and External Balance

There is a clear improvement on the external front. The current account balance has turned from a deficit of -4.33 billion dollars in the previous period to a surplus of +0,036 billion dollars (expectation was 0.65 billion surplus; although the outcome is below expectations, the direction is positive). Monthly trade deficit narrowed from -7.34 billion dollars to -5.24 billion dollars: exports fell from 23.5 to 23.5 billion dollars, while imports decreased from 28.7 to 28.7 billion dollars. The faster contraction in imports compared to the decline in exports shows that the deficit was closed mainly due to domestic demand cooling — this is the expected impact of tight monetary policy on the external balance. Tourism revenues rose on a quarterly basis from 15.9 to 15.9 billion dollars; however, the annual change in tourist numbers was -0.03, flat, meaning revenue growth is coming from the price/quality channel.

On the budget side, the monthly balance has turned from a deficit of -378.1 billion TL to a surplus of +12.9 billion TL. Drawing structural conclusions from a single month's data is misleading (due to seasonal tax effects), but fiscal discipline accompanying disinflation is important for program consistency.

The vulnerability point is reserves: foreign exchange reserves fell from 62,808 billion dollars to 62.8 billion dollars. In a period when the current account is improving, reserve depletion could be due to capital outflows or intervention; this is one of the most critical indicators to watch. The real effective exchange rate index fell from 105.04 to 105.04 — the appreciation trend of the lira has slightly eased.

6. Energy, Commodities, Foreign Exchange and Bond Markets

There is a notable movement in the energy market: Brent oil fell from 97.69 to 97.69 dollars (-6.36%), WTI at 92.61. For a net energy importer like Turkey, the drop in oil prices is positive through two channels: (i) it reduces the import bill, supporting trade and the current account, (ii) it lowers producer costs, easing the PPI-TURKSTAT chain. With PPI rising at 2.57% monthly, this easing in oil prices could partially offset cost pressure in the coming months.

On the FX side, USD/TRY is at 48.98 and EUR/TRY at 55.74 with limited daily changes (+0.06% and +0.09%). The controlled movement of the exchange rate is consistent with the disinflation program's goal of limiting the exchange rate-inflation pass-through. However, when read in conjunction with the decline in reserves, the cost of this stability may be covered by the reserve buffer.

On the gold front, the ounce price has fallen to $4.167.80 (-3.55%) and gram gold to 6.562.80 TL (-3.50%). The decline in gram gold is mainly ounce-driven; since the exchange rate remained flat, there was no offset from the exchange rate channel. The rise in US Treasury yields (30-year at 5.57%) increases the opportunity cost of non-yielding assets like gold, explaining this decline.

7. Transmission Mechanisms: From Macro to Market

Three key chain data points can concretize this:

Interest rate channel: Policy rate (37.0%) → deposit rate (43.94%) and consumer loan rate (2.3%) → real stagnation in credit growth (36.6% nominal vs. 31.51% inflation) → slowdown in retail sales (annual -0,323%, monthly -1%) → contraction in industrial production (monthly -1.0%) → nominal slowdown in company revenue growth → margin pressure from volume. At the same time, high deposit rates increase the alternative return of stocks, pushing up the valuation discount rate — this is the mechanical explanation for the pressure on BIST.

Exchange rate channel: The controlled movement of USD/TRY (48.98) limits import input costs; however, PPI's jump to monthly 2.57% shows that past exchange rate pass-through and cost accumulation are still being reflected in prices. Brent's decline to $97.69 could work in a relieving direction for this channel in the coming period.

Global capital channel: With the US 30-year yield at 4% and Fed projections revised upward, the risk premium required for portfolio flows to emerging markets is rising. Turkey's $62,808 billion drop in reserves suggests this channel has not yet turned in Turkey's favor. Conversely, the current account surplus and disinflation progress are two fundamental pillars that could gradually turn this channel positive by reducing the risk premium.

8. Reflections on BIST 30: Sector Channels

Banks: In a high-interest rate environment, the deposit-loan spread and securities returns support bank profitability; however, the real stagnation in credit growth constrains the volume channel, and credit costs reaching 37% increase non-performing loan risk in the medium term. As disinflation progresses, interest rate cut expectations could add value to banks' bond holdings — this is a conditional positive scenario.

Industry and exporters: Cooling domestic demand (retail down to 23.5% annually) is pressuring the volumes of industrial companies serving the domestic market. The decline in exports to $23.5 billion and the -0.6% monthly contraction in Eurozone retail sales show that demand from main export markets is also weakening. In contrast, the real effective exchange rate still being high at 23.5 limits exporters' competitiveness.

Retail and consumption: % The 63.74 consumer loan rate directly hits credit-based consumption; durable goods and automotive are the most sensitive segments to this channel. Defensive sub-segments like food retail are relatively resilient.

Holding companies: Thanks to their diversified structures, they can benefit from banking profits while partially balancing the pressure in industrial sectors; the net effect depends on the portfolio composition.

9. Scenarios and Monitoring Framework

Base scenario: Disinflation continues gradually; inflation maintains its downward trend from 31.51%, the CBRT remains cautious at 37.0% interest rates, and growth ranges between 2.3-3%. The current account remains balanced with tourism and low oil support. Development that would invalidate this scenario: monthly inflation exceeding 1.84% for several consecutive months or acceleration in PPI-CPI pass-through.

Optimistic scenario: Brent's relaxation at $97.69 becomes permanent, the current surplus becomes permanent, reserves start accumulating again; despite Fed projections, US inflation eases and global returns decline. In this case, the risk premium narrows, the interest rate cut cycle is brought forward, a valuation recovery occurs in BIST. Development that will invalidate: continued decline in reserves or further deterioration in US inflation expectations (4.6%).

Pessimistic scenario: US long-term yields climb above 5.57%, the dollar strengthens globally, oil returns above $100; domestically, reserve loss accelerates and exchange rate pressure emerges. This derails the disinflation program and forces interest rates to stay high for longer. Development that will invalidate: Fed revising projections downward and reserve accumulation resuming in Turkey.

Indicators to follow: monthly CPI/PPI path, CBRT weekly reserve series, credit growth and M3, retail sales and industrial production, US PCE inflation and Fed projections, US long-term bond yields, DXY and Brent.

10. Conclusion and Evaluation

The Turkish economy is on a disinflation path where tight monetary policy has cooled domestic demand, the current balance has moved to surplus, and inflation is declining, albeit slowly. The program's domestic leg is working consistently; the main uncertainty is external: the Fed's upwardly revised interest rate projections, US long-term yields rising to 4% and a strong dollar are limiting the capital flow channel, and the decline in reserves also indicates that the external buffer is thinning. The decline in oil prices and improvement in fiscal balance are positive factors that balance this picture. In the coming period, the direction of the macro outlook will be determined by the interaction of the inflation path and global interest rate conditions; it is healthier to proceed within a conditional scenario framework rather than a one-way forecast.

This text is not investment advice; it has been prepared for education and analysis purposes.

Data Base (key indicators used in analysis)