The Turkish central bank raised its forecast for inflation at the end of 2026 from 28% to 29.5%. Governor Fatih Karahan said energy prices were likely to stay high for longer than the bank expected in August, while food and freight costs were adding to price pressures.
The Central Bank of the Republic of Türkiye raised its forecast for year-end inflation by 1.5 percentage points in its November Inflation Report, presented in Istanbul on November 12. It now expects annual inflation to reach single digits at the end of 2029, a year later than it expected in August.
How did the forecasts and targets change?
In its August report, the bank forecast annual inflation of 28% at the end of 2026 and set an interim target of 24% for the same date. The target sets the rate the bank aims to reach through monetary policy. The forecast gives its best estimate of where inflation will actually end the year. Only that estimate changed for 2026.
| Year | August forecast | November forecast | Interim target in November |
|---|---|---|---|
| 2026 | 28 | 29.5 | 24 |
| 2027 | 15 | 21 | 21 |
| 2028 | 9 | 13.5 | 13.5 |
For 2027 and 2028, the bank raised the interim targets as well as the forecasts. The targets rose by 6 and 4.5 percentage points respectively. The medium-term target remains 5%.
The central bank’s November 12 announcement of its Inflation Report
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Why did the bank raise its energy and food assumptions?
The bank raised its assumption for the average price of oil from $87.80 to $97.20 a barrel in 2026 and from $76.40 to $86.70 in 2027, according to the forecast chapter. It sees less reason to expect energy shipments through the Strait of Hormuz to return to normal soon. Karahan said natural gas prices had risen more sharply than oil prices and that freight costs and refinery margins were pushing up import prices.
The bank now assumes food inflation will end 2026 at 31.3%, up from 28.5%, and 2027 at 24%, up from 19%. A recovery in agricultural output helped contain fruit prices this year. Vegetable prices rose in October as production moved from fields to greenhouses. Karahan said preliminary November data pointed to further increases.
Consumer prices rose just 0.87% in November last year and 0.89% in December. Karahan said that as the comparison moved past those modest increases, the decline in annual inflation could pause in November. In October the consumer price index was up 29.8% year on year. Annualizing the recent underlying pace of price increases gave the bank a lower figure of 23.7%.
What did the governor say about interest rates?
In his remarks, Karahan said the bank would keep monetary policy tight until it achieved price stability. The Monetary Policy Committee cut its policy rate from 37% to 36% on October 22. At the briefing, he said policymakers would look at several months of price data before deciding their next move.
Karahan said weaker demand had helped curb price increases. Retail sales excluding gold were growing more slowly, and card spending had barely changed for several quarters. Services prices rose 36.6% in the year to October, while the annualized pace over the latest three months was 30.9%.
The forecasts assume monetary policy stays tight and that tax decisions and government-set prices support the effort to bring inflation down. A prolonged rise in energy and farm input costs could push inflation above the forecast. A sharper slowdown in demand could take it below. Karahan sets out the new year-end figures about 31 minutes into the bank’s briefing.
