Weekly Bulletin - July 25, 2025

This week, CBRT cut its policy rate by 300 basis points to 43%, while the Market Participants Survey showed that inflation expectations continued to recover. Domestic confidence indices pointed to a deterioration in consumer and real sector confidence, while the sectoral outlook was mixed. Trade wars remained on the agenda this week, with the US and Japan reaching an agreement on tariffs. In the US, PMI data for July showed a mixed picture, with the housing market continuing to perform poorly. The ECB paused its cycle of rate cuts at this week's meeting, leaving its benchmark interest rates unchanged. The data calendar for the upcoming week will be extremely busy, with Fed and BoJ meetings taking primary focus. Moody's and Fitch are expected to publish their assessments of the Turkish economy after markets close today.

At its July meeting, the CBRT cut the one-week repo auction rate, which is the policy rate, by 300 basis points, from 46% to 43%; the overnight lending rate from 49% to 46%; and the overnight borrowing rate from 44.5% to 41.5%. The statement released after the meeting noted that the main trend in inflation remained flat in June, but that leading indicators pointed to a temporary increase in monthly inflation in July due to temporary factors. The statement also emphasized that the step size on the policy path would be assessed based on the inflation outlook, on a meeting-by-meeting basis, and with a cautious approach.

In the US, the preliminary manufacturing PMI fell by 3.2 points mom in July to 49.5, sliding back into contraction territory for the first time in seven months. On the other hand, the preliminary services PMI for the same period rose from 52.9 to 55.2, indicating acceleration in the sector. Trade tariffs and, to a greater extent, rising labor costs caused increased price pressures in both sectors. In the country, existing home sales in June came in at 3.93 million units, below expectations and the lowest level in the past nine months, while the monthly increase of 0.6% in new home sales also failed to meet expectations. High mortgage rates and economic uncertainty are weighing on the housing market, according to the data releases.

The main item on the trade war agenda this week was US President Trump's declaration that tariffs on Japan, including the auto industry, would be lowered from 25% to 15%. Japan agreed to invest USD 550 billion in the US as part of the deal. However, the EU unveiled a second tariff list worth €72 billion in response to Trump's threat of a 30% tariff on EU goods. It was said that if negotiations failed, this list would take effect in addition to the 21 billion euro list that had already been announced. Meanwhile, news emerged during the week that a trade agreement between the US and the EU could be reached.