ISTANBUL

The Turkish Central Bank (CBRT) said on Thursday that it expects annual inflation to decline to 24% at the end of this year and 16% by the end of 2026.

"We estimate that inflation will be between 25% and 29% by the end of 2025. Our forecasts for the end of 2026 indicate that inflation will decline to between 13% and 19%," Central Bank Governor Fatih Karahan said at a press conference in Istanbul.

"We set our interim inflation targets for 2026 and 2027 as 16% and 9%, respectively," he noted.

Karahan said that they anticipate inflation to decline to 9% in 2027 and then stabilize at 5% in the medium term.

He explained that the 4 percentage-point increase in the year-end 2026 inflation estimate from the previous estimate arose from higher food prices, the underlying inflation trend and inertia and Turkish Lira-denominated import prices.

Karahan noted that the recent reduction in uncertainty in global trade following the announcement of tariff rates has marginally improved global growth expectations, and therefore, they have revised their foreign demand assumptions upward.

Due to rising commodity prices due to geopolitical tensions, the bank also revised its crude oil and import price assumptions upward and that food price assumptions remain unchanged for 2025 compared to the previous report and have been revised upward for 2026.

Karahan emphasized that one of the most critical issues is ensuring that domestic demand remains at disinflationary levels through the measures they are taking in monetary policy.

He stressed that the steps to be taken will be determined to ensure the tightness required by the interim targets, taking into account inflation realizations, its underlying trend, and expectations.

"As our cautious stance continues, we anticipate a steady decline in inflation in the coming period. Indeed, our resolute monetary policy stance will continue to support the disinflation process through a rebalancing of domestic demand, a real appreciation of the Turkish lira, and an improvement in inflation expectations," Karahan said.

Stating that with expectations continuing to decline and the continued decline in services inflation Karahan said the decline in the underlying inflation trend will continue through the remainder of 2025, and that coordination of fiscal policies will also contribute to this process.

Karahan emphasized that in summary, they will resolutely maintain their tight monetary policy stance until price stability is achieved, stating that they have set the policy rate to ensure the tightness required by the disinflation process they envision.

Karahan stated that they have taken into account inflation realizations, the underlying trend, and inflation expectations during this process, continuing:

"I would like to underscore on this occasion that we are taking a cautious, meeting-based approach to the policy rate and its magnitude, focusing on the inflation outlook. If we anticipate a significant and persistent deterioration in inflation, we will effectively use all monetary policy tools," he added.