Macroeconomic Evaluation

1. Global Macroeconomic Outlook

The US economy presents a dual picture, with core inflation running near the target at 2.4% annually, while headline inflation remains sticky at 3.4%. Despite the Fed keeping its policy rate steady at 4.0%, the upward revision in rate projections (4.1% for the first year) is causing the market to delay its rate cut expectations. On the growth side, a strong quarterly performance of 2.2% and a monthly increase of 1.2% in retail sales indicate the resilience of domestic demand, while the sharp slowdown in non-farm payrolls by 29 thousand people points to a cooling in the labor market. In the Eurozone, the rise in headline inflation to 3.8% and the notable increase in PPI by 8.2% annually strengthen expectations that the ECB will keep its policy rate at 2.65% for a long time. Although the region's economy grew better than expected at 0.6% quarterly, the weakening in consumer confidence by -16.5 points and the flat trend in industrial production show that the recovery is fragile.

2. Turkey's Macroeconomic Outlook

In Türkiye, the disinflation process has made significant progress, thanks to the annual CPI falling to 29.73% and the PPI remaining below the headline at 27.38%. The monthly inflation coming in at 1.84%, below expectations, indicates that the slowdown in price increases continues. While the TCMB keeps its policy rate at 37.0%, the real rate is in positive territory, providing the necessary tightness for the entrenchment of disinflation. On the growth side, there is a moderate performance of 2.3% annually; the decline in the unemployment rate to 7.7% points to resilience in the labor market. However, the annual contraction of 1.86% in industrial production reveals the pressure of tight monetary policy on the real sector.

3. Domestic Demand, Credit and Liquidity

The transmission channel from the policy rate to credit costs is working clearly, with the consumer loan rate at a very high level of 64.74%. The deposit rate remaining above the policy rate at 43.3% encourages savings while suppressing credit demand. The annual credit growth of 36.3% and the M3 money supply increase of 26.1%, although seemingly high nominally, point to a real credit contraction when adjusted for inflation. The annual increase of 10.4% in retail sales reflects real domestic demand growth that remains below inflation. This picture shows that tight monetary conditions are gradually cooling domestic demand and supporting the disinflation process.

4. Global Risk Appetite and Interest Rate Expectations

Global risk appetite gives a two-way signal, with the VIX index remaining low at 14.84 and the US 5-year Treasury yield rising to 5.02%. The DXY stabilizing at 102.21 indicates that pressure on emerging market currencies remains limited. While the rise in long-term US Treasury yields (30-year at 5.6%) points to tightening global liquidity conditions, the upward revision in the Fed's rate projections suggests that this tightness may be persistent. This environment stands out as a limiting factor for capital flows to emerging markets.

5. Budget and External Balance

Türkiye's external balance shows signs of improvement, with the current account approaching balance at 0,036 billion dollars in July and the trade deficit stabilizing at 5.23 billion dollars. The rise in exports to 25.98 billion dollars and the increase in tourism revenues to 15.9 billion dollars support the strengthening of external income items. However, the increase in imports to 31.21 billion dollars and the decline in foreign exchange reserves to 60.33 billion dollars indicate that external financing needs persist. The budget balance posting a surplus of 12.9 billion TL in August shows that fiscal discipline is maintained.

6. Energy, Commodities, Foreign Exchange and Bond Markets

Brent oil remaining high at 104.72 dollars/barrel constitutes a negative factor for Türkiye's current account and inflation outlook through energy imports. Gold being at record levels at 4.216 dollars/ounce shows that demand for protection against global uncertainties is strong. The USD/TRY trading flat at 49.08 and EUR/TRY at 55.21, when evaluated together with the real effective exchange rate rising to an index of 105.45, indicates that the pass-through of the exchange rate to inflation remains limited. The rise of gram gold to 6.653 TL reveals that gold maintains its appeal among TL-denominated savings instruments.

7. Transmission Mechanisms: From Macro to Market

The channel from the policy rate to domestic demand works through the reflection of the 37% policy rate on the 64.74% consumer loan rate and the real contraction in credit growth. This situation creates downward pressure on valuations by squeezing company sales and margins. In the exchange rate channel, the relative stability of USD/TRY and the decline in PPI to 27.38% show that the increase in imported input costs remains limited. In the global interest rate channel, the rise in the US 5-year Treasury yield to 5.02% puts pressure on foreign capital flows, pushing the risk premium upward.

8. Reflections on BIST 30: Sector Channels

In the high-interest-rate environment, the banking sector benefits positively from the deposit rate remaining above the policy rate at 43.3%; however, the slowdown in credit growth limits interest income. Industrial companies face margin pressure due to the contraction in industrial production, despite the capacity utilization rate rising to 74.2%. While conglomerates experience pressure on consolidated profitability due to high interest expenses and weak domestic demand, the retail sector presents a cautious outlook despite the recovery in consumer confidence by 91.9 points, as real spending growth remains limited.

9. Scenarios and Monitoring Framework

The base scenario envisages the gradual decline in inflation continuing and the policy rate remaining at 37% until the end of the year, maintaining real rates in positive territory. The optimistic scenario includes early rate cuts if monthly inflation falls below 1.84% and the current account posts a persistent surplus. The pessimistic scenario, on the other hand, envisages exchange rate pressure becoming pronounced again if Brent oil rises above 104.72 dollars and US Treasury yields increase further. Among the key indicators to watch, monthly inflation, changes in foreign exchange reserves, and US rate projections stand out.

10. Conclusion and Evaluation

While the Turkish economy makes progress in the disinflation process thanks to tight monetary policy and fiscal discipline, global conditions constitute the most important external risk to this process. Sticky inflation in the US and upward revisions to rate projections point to a challenging liquidity environment for emerging markets. The cooling in domestic demand and high credit costs show that the balance between growth and inflation is delicate. In the coming period, the course of inflation, reserve accumulation, and global interest rate dynamics will be the main factors determining the direction of Turkish asset prices. This analysis is for educational and informational purposes; it does not contain investment advice.

Data Base (key indicators used in analysis)