Inflation expectations in Türkiye for the next 12 months show a sharp divergence between households and professional forecasters, according to the Central Bank of the Republic of Türkiye’s (CBRT) latest Sectoral Inflation Expectations Survey released on Monday.

The July survey revealed that household expectations climbed to 54.5%, up 1.5 percentage points from 53% in June, reflecting persistent public concern over price increases. In contrast, market participants lowered their forecast to 23.4%—down 1.2 points from last month—and the real sector reduced its projection to 39%, a 0.8-point decrease.

The CBRT noted a striking contrast in sentiment: while financial and industrial stakeholders see easing price pressures, households remain wary. Household expectations, though down from the 72% recorded in July 2024, remain far above both the CBRT’s official year-end inflation target of 24% and the upper bound of 29%.

The proportion of households expecting inflation to decline over the next year fell sharply, from 30.7% in June to 26.6% in July—a 4.1-point drop. This shift suggests a growing skepticism among the public about the pace of disinflation.

Market participants have lowered their inflation expectations by 6.6 points since July 2024, while the real sector has cut its projection by a more substantial 16 points, indicating greater confidence in the government’s economic management and monetary policy.

Despite the optimism among professionals, the CBRT acknowledged that both household and market expectations remain above the official inflation target. The widening perception gap between public and professional forecasts poses a communication challenge for the central bank as it works to anchor expectations and sustain economic stability.

As Türkiye continues to navigate inflationary pressures, the CBRT faces growing pressure to bridge the divide between public sentiment and professional projections, ensuring that inflation expectations move in line with its policy framework. (ILKHA)