Central Bank raises 2026 inflation forecast to 29.5 percent

The Central Bank of the Republic of Türkiye (TCMB) raised its 2026 year-end inflation forecast from 28 percent to 29.5 percent, its 2027 forecast from 15 percent to 21 percent, and its 2028 forecast from 9 percent to 13.5 percent. The year-end food inflation forecast was also raised from 28.5 percent to 31.3 percent; oil price assumptions for 2026 and 2027 were also revised upward.

Central Bank Governor Fatih Karahan spoke at an information meeting held to present the year's fourth Inflation Report. Karahan drew attention to the fact that domestic demand conditions could prove weaker than envisaged in the baseline scenario due to factors such as the lagged effects of monetary policy and a further tightening of financial conditions, and stated that this created a downward risk on the forecasts. "The contribution of demand conditions to the disinflation process became evident in this period," Karahan said, noting that final domestic demand had lost significant momentum.

Recalling that monthly consumer inflation had come in low at 0.87 percent and 0.89 percent respectively in November and December 2025, partly owing to the favorable course of vegetable prices, Karahan noted that because of this low base the decline in annual inflation may have paused in November, but said this did not mean that the improvement in the underlying trend of inflation had stopped.

Saying that monthly rent increases had slowed considerably in recent months, falling below the services group average, Karahan said, "The annualized recent trend in rents fell below 30 percent, reaching the level of consumer inflation." Asked about the broadening of the investor base in the stock market, Karahan said it was possible for an asset effect originating from equities to be reflected in consumption.

TCMB also decided to make interest-compensation payments in Turkish lira for the required reserves established against banks' and financing companies' non-deposit liabilities in Turkish lira and foreign currency with maturities longer than one year. The 8-week growth limit was raised from 3 percent to 3.5 percent for consumer need and vehicle loans extended to consumers, from 5 percent to 5.5 percent for Turkish lira loans extended to SMEs, and from 2 percent to 2.5 percent for Turkish lira loans extended to non-SME businesses. The Central Bank's move is expected to increase loans by close to 70 billion lira.