Turkish Central Bank maintains its interim inflation targets

ISTANBUL

Türkiye’s Central Bank has maintained its interim inflation targets for 2025, 2026 and 2027 at 24 percent, 16 percent and 9 percent, respectively.

“We forecast inflation to be between 31 percent and 33 percent by the end of 2025. For the end of 2026, our forecasts indicate that inflation will decline to a range of 13 to 19 percent,” said Governor Fatih Karahan, speaking at the Briefing on Inflation Report 2025-IV in Istanbul.

Previously, in its third inflation report of the year, the bank projected that inflation at the end of 2025 would be in the 25-29 percent range.

Türkiye's annual inflation rate was at 32.87 percent in October, reaching its lowest level for the last 47 months.

In the disinflation process, they will continue to do whatever it takes to bring inflation down in line with their interim targets, Karahan said.

“We will stand firm to determine the steps we will take in a way that ensures the tightness required by the interim targets,” he added.

The bank will continue to adopt a prudent, inflation-focused and meeting-by-meeting approach when deciding on policy steps and their size, according to Karahan.

The Central Bank’s Monetary Policy Committee (MPC) in October lowered its policy rate by 100 basis points, matching market forecasts.

The benchmark one-week repo rate was lowered from 40.5 percent to 39.5 percent.

The committee also cut the overnight lending rate from 43.5 percent to 42.5 percent and the overnight borrowing rate from 39 percent to 38 percent.

The MPC’s next meeting is scheduled for Dec. 11.

“The disinflation process that started in June 2024 has recently lost momentum, yet we will take measures to ensure that inflation remains in line with the interim targets,” Karahan said at the briefing, adding that this disinflationary outlook is expected to last for the remainder of the year.

He acknowledged that in the last two months, inflation figures were above the bank’s forecast range, partly due to food prices.

The inertia in services inflation persists due to items with strong time-dependent price-setting and backward-indexation tendency, such as education and rent, he explained.

“In the upcoming period, we expect that the improvement in inflation expectations will be supported by our decisive monetary policy stance and the continued decline in inflation figures that it will ensure,” Karahan said.

He also noted that the level of deposit rates continues to support the transition to the Turkish Lira and savings, while the share of lira assets in the financial system hovers close to the historical average.