Turkey’s central bank on August 13 raised its end-2026 official inflation "forecast" to 28% in its latest quarterly inflation report from the previously stated range of 26% that it announced in May.

It is not advisable to plan, price or draw inferences based on Turkey’s official data. There is widespread concern about the reliability of the country’s data series.

Ranges, forecasts, interim and official targets as official inflation remains stuck at 32%

In August 2025, the authority introduced a new term, namely “interim targets”. In its latest report, it left its end-2026 “interim target” for annual inflation at 24%.

The official inflation target remains untouched at 5% y/y.

Since its introduction, the “interim target” concept has been criticised for being null as the given figures have consecutively fallen outside of the forecasts. In the May quarterly inflation report, the authority scrapped its forecast range.

“The war and high uncertainty environment that we are currently experiencing are prompting the reconsideration of the ‘communication of uncertainty around forecasts’, along with the revisions in interim targets,” central bank governor Fatih Karahan said during the press conference for the May report.

“Looking back at recent years, it is notable that, during such complex shock environments, many central banks have suspended the use of forecast band approaches in their communication,” he added.

End-2026 expectations move above 30%-level

Even prior to the February 28 US/Israeli sudden attack on Iran, the inflation realisation was expected to come in at above the 20%-level at end-2026.

Since then, financial institutions’ forecasts have broken through the 30%-level in response to the course taken by oil prices.

On August 3, the Turkish Statistical Institute (TUIK, or TurkStat) said that Turkey’s consumer price index (CPI) inflation officially edged down to 31.75% y/y in July from 32.11% in June.

Since April, across the last four months, TUIK has released official annual inflation at 32%, with the rounding of decimals. Since July 2025, the figure has been released at between 30.65% and 33.52%.

On November 12, the central bank will release its next quarterly inflation report, the fourth and last for 2026. It will include updated forecasts.

Iran War and slippery oil prices

During the press conference held on August 13 for the latest inflation report, Karahan said that central bank policymakers think that the worst is behind Turkey when it comes to war impacts.

The central bank’s average Brent oil price forecast for 2026 was cut from $89 in the May report to $88 in the latest report. It still compares significantly higher with the $60s provided in the February report.

On August 12, Turkey’s president, Recep Tayyip Erdogan, zeroed the special consumption tax on diesel fuel to end-August. Starting from September, Turkish lira (TRY) 3 will be added each month. As a result, the price of one litre of diesel fuel declined to TRY 80 from just below TRY 90.

The USD/Turkish lira (TRY) pair remains under control. Portfolio flows remain positive but slow.

Polemics

Istanbul Blog writes: Another interesting comment by the governor during the Q&A session was on the real sector’s calls for cheap loans. De-industrialisation and expansion of the service sector are common themes in countries that get richer, he said. It was a reference to Turkey’s official GDP figures.

Karahan, similar to his predecessor Hafize Gaye Erkan, always provides good material for the media when he talks without reading from a prepared text. He is not so worried about the inflation performance. War boosts inflation. Gold prices boost domestic demand. The economy collapses over booming wealth. And the governor keeps his cool and does his job, namely reading some texts at some meetings.

Next policy rate meeting on Sept 10

On September 10, the monetary policy committee (MPC) will hold its sixth rate-setting meeting of the year. Crude oil prices, which are directly connected to the ongoing Middle East conflict, will determine the period ahead.

On July 23, the MPC left its main policy rate (one-week repo) unchanged at 37% for a fourth consecutive time in line with expectations.

The revival of the regulator's one week repo rates, which would bring the active rate (seen in the overnight window rate at 40%) to 37% is awaited, prior to a cutting of the main rate.