Bank of America Revises Türkiye’s Inflation Forecast Amid Political Turmoil
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Bank of America (BofA) has revised its 2025 inflation forecast for Türkiye, raising it from 25.7% to 28.1%, citing the impact of ongoing political instability, particularly following the arrest of Istanbul Mayor Ekrem İmamoğlu, a key opposition figure.
The U.S.-based investment bank also adjusted its year-end policy interest rate projection, increasing it from 30.5% to 32.5%. In light of recent developments, the bank no longer anticipates a 200 basis point rate cut at the Central Bank of the Republic of Türkiye’s (CBRT) April meeting. Instead, it expects the central bank to hold rates steady as it navigates a volatile financial and political landscape.
Sharp Decline in CBRT Reserves
BofA analysts also reported a significant decline in CBRT’s net reserves, estimating a $11.2 billion drop on March 19 alone, with the total weekly outflow reaching approximately $21–23 billion.
The decline, they say, was driven primarily by currency interventions aimed at defending the Turkish lira, which has come under pressure amid political uncertainty and reduced foreign investment.
While corporate sector demand for foreign exchange remained active, local retail demand was relatively muted, BofA noted.
Political Uncertainty Expected to Ease
Despite the current turbulence, BofA maintains a cautiously optimistic outlook for Türkiye’s political and economic stability in the near term. Analysts stated that their recent field visits suggest a growing sense of clarity among market participants regarding the legal and political dynamics surrounding İmamoğlu’s arrest.
The bank also emphasized that Türkiye’s economic leadership remains firmly in control, with a clear commitment to the current stabilization program. According to the report, political support for these economic policies remains intact, bolstering confidence that inflation control efforts will continue despite the recent shocks.
