Turkish Central Bank targets inflation to drop to 12% in 2026, and to 8% in 2027, before stabilizing at 5% in medium term, Governor Fatih Karahan says
The Turkish Central Bank (CBRT) said on Thursday that it expects annual inflation to decline to 24% at the end of this year and 12% by the end of 2026.
"We target inflation to decrease to 8% in 2027 and stabilize at 5% in the medium term," Central Bank Governor Fatih Karahan said at a press conference in Istanbul.
"As expectations return to a downward trend and the fall in services inflation sustained, the decline in the underlying inflation will continue in the remainder of 2025," he noted.
Karahan said the recent rise in protectionist tendencies in global trade has increased downside risks to the global growth outlook. Therefore, he added, they have significantly revised their assumptions for external demand, which they use as a basis for their forecasts.
In line with this outlook, he said they also revised down their projection for crude oil and import prices for 2025 and 2026, while raising their assumptions for food prices for 2025 due to unprocessed food inflation.
The governor said their medium-term forecasts are based on the fact that they will maintain a tight monetary policy stance until a significant and long-term improvement in the inflation outlook is achieved. "We have also reflected in our forecasts that the coordination among economic policies will continue to increase."
He emphasized that the bank's recently implemented policies have prevented a significant deterioration in the inflation outlook.
As long as the cautious stance is maintained, he said inflation is expected to fall steadily in the coming months.
"We will decisively maintain our tight monetary policy stance until a permanent decline in inflation is sustained and price stability is achieved," he said, adding that they continue to receive the results of the tight monetary policy gradually.
Karahan said the disinflation process has been ongoing since June 2024, accompanied by a rebalancing of demand. He added that at this point, the underlying trend of inflation has declined, the decline in services inflation has become more pronounced, and goods inflation is also low.
This process was accompanied by a picture of increased uncertainties in the recent period, he said, adding: "In response to the financial market developments in March and April, the CBRT proactively took the necessary measures. Going forward, we will maintain our decisive monetary policy stance and take steps to ensure that the disinflation process continues."
The governor also addressed the global uncertainty caused by US tariffs, saying: “The USA announced a wide range of tariffs on April 2. These tariffs, which were expected to be sectoral or regional before the announcement, turned out to involve more than 180 countries."
On the other hand, Karahan emphasized that bilateral talks and postponements in recent weeks have somewhat eased tensions over global trade.
“Despite the recent moderation, uncertainties surrounding global trade and economic policies remain elevated,” he said, adding that these uncertainties increase downside risks to global growth and have possible effects on inflation that vary across countries.
