The Unbreakable Chain in the Inflation Spiral: The Deep Chasm Between Central Targets and Real Expectations

The Central Bank's sectoral inflation expectations reveal that despite the downward trend in inflation, there is deep resistance far from the targets, proving the economy's stubborn nature. The data demonstrates that the forecasts of the real sector, which holds pricing power, are more realistic than the optimistic market participants, clarifying just how difficult pricing will become in the upcoming period.

Inflation Resistance Persisting Until July 2027

As the ties between official targets and reality reach a breaking point, a striking divergence exists between the perspectives of market players and households.

■ For July 2027, market participants forecast an annual inflation rate of 23.95%, the real sector 32.50%, and households 44.94%.

■ While the official target for 2027 is set at 15%, if the year closes around 30%, significant tightening will be required to meet the goal.

■ Even the forecasts of market participants hover approximately 20% above the official target.

The Dominance of the Real Sector in Forecasting

Historical data leaves no room for doubt regarding who makes more accurate predictions; the real sector, with its pricing power, continues to make the most accurate forecasts.

■ In forecasts made for June 2026, realized inflation was 32.11%, while the real sector predicted 39.80%, households 52.99%, and market participants 24.56%.

■ In the last year, inflation has been stuck between 30.7% and 33.5%, signaling a distinct stickiness in the market.

■ The fluctuation of average forecasts between 34% and 38% exposes the sheer strength of inflationary pressures.

The Central Bank's Sensitivity Map

Analyzing the psychology behind pricing, the Central Bank emphasizes that the sensitivity of different sectors to macro data plays a decisive role in price formation.

■ Firms exhibit a higher sensitivity to monthly inflation realizations, while consumers are more reactive to exchange rate movements.

■ The pricing power of the real sector makes their expectations critical for the future course of inflation.

■ High inflation expectations of consumers have the potential to create a direct inflationary effect in the economy by pulling demand forward.

This structural breakdown in inflation expectations delays "mean reversion" signals in our quantitative models. The aggressive forecasts of the real sector, such as 32.5%, signal the pressure cost inflation will create on corporate balance sheets. In the BIST 100 index, amidst this uncertainty, every selling wave forming at the upper band of the Ichimoku cloud (Kumo) could trigger a technical correction. However, in the short term, the stickiness of inflation at 30% levels will continue to increase volatility in equity markets due to the interest/yield arbitrage.