The Central Bank of the Republic of Türkiye has raised its inflation forecast for the end of 2026 to 29.5%, while its expectation for the end of 2027 is now 21%. The forecast for 2028 has been increased to 13.5%, while the expectation for 2029 remains at 9%.
Central bank Governor Fatih Karahan presented the final inflation report of the year. He cited the consequences of the war in Iran and broader geopolitical tensions as the reason for the changes to the forecasts.
“Supply-side shocks triggered by geopolitical events are limiting the decline in headline inflation. The continuation of this situation maintains the risks of higher inflation and requires a cautious policy stance,” Fatih Karahan said.According to him, rising oil prices, as well as weakening expectations of a normalization of energy supplies through the Strait of Hormuz, contributed to the revision. Karahan described geopolitical events as the leading risk for a new surge in oil prices and for prices to remain at high levels.
Inflation remains close to 30%
Annual inflation in Türkiye reached 29.77% in October, according to data from the Turkish Statistical Institute. The indicator rose slightly from the nearly five-year low of 29.73% recorded in September. Consumer prices increased by 2.58% month-on-month in October, compared with 1.84% a month earlier.
Karahan said that the disinflation process had slowed. The reasons cited include high food inflation at the beginning of the year and supply-side pressure caused by geopolitical events at the end of February.
The slowdown in services inflation is continuing, but varies among the different groups. Growth in communications was higher than expected, while transport costs were affected by energy prices. Disinflation in rents and other services is continuing.
Food and energy sustain the pressure
According to Karahan, fresh fruit and vegetable prices continue to cause fluctuations in food inflation. Fruit price increases remain moderate due to favorable harvest conditions, but the trend is different for vegetables. Leading indicators show that vegetable price increases continued in November.
The central bank has raised its assumptions for oil prices in 2026 and 2027. Karahan noted that natural gas had become more expensive than oil, while disruptions to energy supplies, higher refinery margins and transportation costs were increasing pressure on import prices.
The bank maintained its medium-term target of stabilizing inflation at 5%. Karahan stressed that monetary policy is not adjusted on the basis of data for a single month alone, but that the institution is monitoring risks to inflation expectations and pricing behavior.