Turkey’s central bank on August 14 raised its end-2025 official inflation "forecast" range to 25-29% in its latest quarterly inflation report. The authority also introduced a new term, namely “interim targets”, and left its end-year “target” unchanged at 24%.

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.

A chaos of forecasts and targets

Prior to August 2023, when the first press meeting held by the Erdogan administration’s new “orthodox” economic team took place as it released its first inflation report, the central bank released "forecasts", rather than “targets” in its quarterly reports.

Between August 2023 and August this year, the orthodox officials suggested during press conferences that they were actually treating their “forecasts” as their "targets".

Now, we have “interim targets”. On paper, the official inflation target still stands at 5% y/y.

24% “interim target”

In May, in its previous quarterly inflation report, the central bank left its end-2025 official inflation “target” unchanged at 24% y/y. The upper boundary of the forecast range was also kept unchanged at 29% with the lower boundary set at 19%.

In the latest report, the lower boundary is pushed up to 25%. The upper boundary remains at 29%. The “target” or “forecast” or “mid-point of the forecast range” falls outside of the new forecast range.

The orthodox team has solved the problem with 24% by calling it their new “interim target”.

Listen to the Prophet

Istanbul Blog writes: “Make it easier, do not make it harder. Deliver glad tidings, do not gross people out,” is a hadith attributed to the Prophet Mohammed by Bukhari.

The orthodox crowd at Turkey’s central bank might do well to recall it.

November 7, last update

On November 7, the central bank will release its next and last quarterly inflation report for this year, which will include updated forecasts.

Official inflation is supposed to stand at a little above (or below) the 30%-level at end-2025.

34% y/y in July

On August 4, the Turkish Statistical Institute (TUIK, or TurkStat) said that Turkey’s consumer price index (CPI) inflation officially stood at 34% y/y in July versus 35% y/y in June and 44% y/y at end-2024.

The central bank anticipated that the seasonally-adjusted monthly inflation figures would edge up a little in 1Q25 (due to wage hikes and new year price/fee updates) in comparison to the 2%s in 4Q24.

The expectation is that the figures would fall below the 1.5%-level starting from 3Q25.

Central bank governor Fatih Karahan reiterated on May 22 that the seasonally-adjusted monthly figure would end the year at a little bit above the 1%-level.

Three rate cuts ahead in September, October and December

On July 24, the central bank revived its monetary easing cycle by delivering a 300-bp rate cut that brought its policy rate to 43%.

On September 11, the authority will hold its next rate-setting meeting. As things stand, another rate cut is almost certain. The size of the cut is, meanwhile, not certain.

October 23 and December 11 are the other remaining dates for the setting of rates this year.

Rate cuts of 300bp in the next three meetings would bring the one-week repo rate to 34% while 200-bp cuts would mean 37% at end-2025.

As things stand, realisation will come in somewhere between 34% and 37% depending on the course of the official inflation releases.

On August 12, Isbank (ISCTR) CEO Hakan Aran said that he sees the policy rate at 35% and official inflation at 29% at end-2025.

Prior to the July 24 meeting, Aran expected a 350-bp rate cut. So, we might say that the policy rate is supposed to be between 35% and 37% at end-2025.

Markets unflustered

In recent weeks, portfolio flows into Turkey turned positive and the country’s central bank reserves followed through on a recovery trend. Also, debt inflows have strengthened.

The USD/TRY pair is now in the 40s. The smooth nominal devaluation and real lira appreciation policy remains on track.

Another date for the diary, September 15

The finance industry has shown an interest in a trial concerning the main opposition Republican People’s Party (CHP) being conducted by the Ankara 42nd (Asliye Hukuk) Civil Court of First Instance.

The next hearing in this case will be held on September 15. The finance industry has indicated that Turkish markets will remain calm at least until then.

On June 11, bne IntelliNews noted: “A [government] seizure of the CHP or, in other words, the replacement of the current CHP management, is not something that can be envisaged for the near future.”

Do not, however, bet the farm on it. No one knows what President Recep Tayyip Erdogan is planning. Perhaps, even he is not sure what his next step will be. In the run-up to the September 15 hearing, he will keep a keen eye on moves made by CHP leader Ozgur Ozel.

It’s goodbye to mayor Aydin

Istanbul Blog writes again: On August 14, Ozel’s mayor at Aydin Metropolitan Municipality (an Aegean province), Ozlem Cercioglu, resigned from the CHP and joined Erdogan’s ruling Justice and Development Party (AKP).

She also stated that a total of three district mayors would join the AKP. However, there was no information on the names when this article was written.

According to Ozel, President Recep Tayyip Erdogan offered Cercioglu the options of joining the AKP or going to jail.

After Ozel joined Erdogan’s new parliamentary commission (which is to, at least on paper, solve the Kurdish question, but will actually amend the constitution in line with Erdogan’s wishes), Erdogan reinstated the CHP’s mayor of Adiyaman.

However, the acquisition of the Aydin municipality suggests that participating in Erdogan’s commission is not helping Ozel when it comes to saving his municipalities.

Nevertheless, the feckless CHP will almost certainly play within the limits of the field set by the regime until the last municipality is seized and the last salary of the last CHP member in the last CHP-held public post is cut.

Latest in the municipality-seizing business

As things stand,17 CHP mayors, including two mayors from Buyukcekmece, are in jail. The mayor of Adiyaman has been reinstated.

Five CHP municipalities, namely Esenyurt (Istanbul district), Ovacik (Tunceli town), Sisli (Istanbul district), Gaziosmanpasa (Istanbul district) and Aydin (metropolitan), have so far been seized by the government. Three more districts in Aydin may be added to the list of the taken when things become clear.

Three municipalities were seized directly on terrorism charges while the regime holds the majority in the Gaziosmanpasa parliament. The Aydin case introduced a new takeover method, namely “free will”.

In seven municipalities, the district parliament has elected a CHP member as the new mayor to replace the jailed mayor. The seven are Istanbul (metropolitan), Besiktas (Istanbul district), Avcilar (Istanbul district), Buyukcekmece (Istanbul district), Sile (Istanbul district), Antalya (metropolitan) and Manavgat (Antalya district)).

After the detention of the second mayor, in Buyukcekmece, the district parliament elected another CHP member as mayor.

The remaining five (Beykoz (Istanbul district), Beylikduzu (Istanbul district), Ceyhan (Adana district), Seyhan (Adana district), Adana (metropolitan)) are currently in limbo.