Turkish Central Bank raises inflation forecast for 2025

ANKARA

Türkiye’s Central Bank on Friday raised its year-end inflation forecast for 2025 while keeping it unchanged for 2026.

Annual consumer inflation is expected to reach 24% this year, up 3 percentage points from the previous forecast, Governor Fatih Karahan told a meeting held to release the bank’s first inflation report of this year.


"The forecast revision for 2025 was driven by factors that are relatively beyond the control of monetary policy," Karahan said.

The leading factors were a higher weight for the services group in the Consumer Prices Index (CPI) basket, the update in food inflation due to the unprocessed food and the increase in co-payment by patients’ shares in medical examinations, he explained.

Despite the revision, the governor highlighted that this adjustment does not indicate any easing of its monetary policy stance.

"Hence, we kept our 2026 forecast unchanged within a context where the probable secondary effects of the revision in our 2025 forecast through expectations will be offset by the tight monetary stance," he said.

The forecast for 2026 was kept unchanged at 12%, Karahan said, adding: "We forecast inflation will ease to 8% by 2027,” with the long-term goal being to stabilize inflation at 5%.

The governor reaffirmed the Central Bank’s commitment to its disinflation strategy, highlighting measures such as maintaining tight financial conditions, encouraging moderation in domestic demand, and fostering the real appreciation of the Turkish lira.


According to recent data from TurkStat, Türkiye's annual inflation rate dropped to a 19-month low of 42.12% in January with the disinflation process started last January.


Karahan also underlined the importance of policy coordination, saying: "The decline in the underlying inflation will continue in 2025 as the stickiness in services inflation weakens and the improvement in inflation expectations become more pronounced. The coordination between monetary and fiscal policies will contribute to the disinflation process as well."

The Central Bank vowed to maintain its tight monetary policy stance until a sustained decline in inflation is achieved, ensuring price stability over the long term.