The Central Bank's year-end inflation forecast remains unchanged: 24 percent.

22.05.2025 11:11

The Central Bank President Fatih Karahan presented the second Inflation Report of the year. Karahan announced that the Central Bank's year-end inflation forecast remained unchanged at 24% and that the 2026 forecast was also maintained at 12%. He stated, "Inflation is expected to decline to 8% in 2027."

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TCMB President Fatih Karahan spoke at an information meeting held at the Türkiye Cumhuriyet Merkez Bankası Campus in Istanbul Financial Center to introduce the 2nd Inflation Report of the year.

Highlights from Karahan's speech are as follows; "We continue to gradually receive the results of our tight monetary policy. In response to the volatility in financial markets in March and April, we, as TCMB, took the necessary steps proactively. In the upcoming period, we will continue to act in a way that ensures the continuation of disinflation by maintaining our determined stance on monetary policy. Uncertainty regarding global trade and economic policies remains at high levels.

"TARIFF STEPS HAVE INCREASED GLOBAL INFLATION EXPECTATIONS"

Tariff steps have somewhat increased global inflation expectations. As a result of the tight monetary policy, the demand composition has become more balanced. Industrial and service production increased in the first quarter. The labor market is less tight than implied by the headline unemployment rate. Although domestic demand has lost momentum, it has remained above expectations.

"THE INFLATION-REDUCING EFFECT OF DEMAND CONDITIONS HAS DECREASED"

In the first quarter, the inflation-reducing effect of demand conditions has decreased. We predict that the ratio of the current account deficit to national income in 2025 will be somewhat higher than in 2024, but will remain below long-term averages. The disinflation process that started in June 2024 continues uninterrupted. The last three months' data indicate a horizontal trend in the main trend.

"EXCHANGE RATE EFFECT IS MORE LIMITED COMPARED TO THE PAST"

Main trend indicators point to the continuation of the disinflation process. The decline in service inflation following goods inflation is also becoming evident. Core goods inflation strengthened in April. Current data imply that the exchange rate effect is more limited compared to the past. A decrease in commodity prices is expected to support disinflation. The share of the 16 products most affected by the recent frost event in the consumer basket is around 1.5 percent.

Inflation expectations continue to remain above our disinflation path. This outlook necessitates maintaining our tight and determined stance on monetary policy. The proactive steps we have taken within market operations have supported the tight monetary policy stance. The effects of the measures taken have reduced volatility in financial markets. The tightness in financial conditions continues. The inclination towards foreign currency in portfolio preferences has been limited.

"INFLATION IS EXPECTED TO FALL TO 82% IN 2027"

Our tight monetary policy stance supports reserves. While forming medium-term forecasts, we have assumed that we will maintain the tight stance on monetary policy until a clear and permanent improvement is achieved in the inflation outlook. Inflation is expected to decrease to 24% in 2025, 12% in 2026, and 8% in 2027.

The upward and downward effects on forecasts have balanced each other out with the policy response. Considering that uncertainties are higher than in the past, we will not compromise on our cautious and tight monetary policy stance."