Turkey Central Bank Raises Inflation Forecast to 24%

Turkey's central bank has raised its year-end inflation forecast for 2025 to 24%, up from 21%, while maintaining its forecast for 2026 at 12% and predicting inflation will drop to 8% by 2027. Governor Fatih Karahan emphasized that the bank's decisions are data-driven and not on autopilot, following two consecutive interest rate cuts. This revision was influenced by factors beyond monetary policy control, including the rising weight of services in the Consumer Prices Index and increases in food inflation. Despite the forecast changes, Karahan assured that the monetary policy stance remains tight, aimed at stabilizing inflation after it had peaked above 75% last May. January's annual inflation rate fell to 42.12%, indicating a continuing disinflation trend, although monthly inflation rose unexpectedly to 5.03%. The central bank's aggressive rate hikes, initiated in June 2023, have shifted towards a more conventional policy approach after years of low rates intended to stimulate growth.