Türkiye’s central bank revealed interim inflation targets as part of a new communication strategy on Thursday, establishing a target of 24 percent for the end of 2025 and 16 percent for the end of 2026.
During the presentation of the bank’s quarterly inflation report in Istanbul, Governor Fatih Karahan indicated that inflation is currently anticipated to range between 25 percent and 29 percent in 2025 and between 13 percent and 19 percent in 2026. “We have decided to change the framework for presenting medium-term forecasts,” Karahan stated. “We will present ‘interim targets’ that will not be changed unless extraordinary circumstances occur between report periods.”
“The ‘year-end interim targets’ will serve as a commitment and anchor,” he added.
Last month, Türkiye’s central bank reduced interest rates by 300 basis points to 43 percent, resuming an easing cycle that had been interrupted by political instability earlier this year, as market conditions have since stabilized and disinflation has persisted. Annual consumer price inflation dropped to 33.52 percent in July, maintaining a downward trend after reaching a peak of 75 percent in May of last year.
Commitment to tight monetary policy
The bank is maintaining its 24 percent inflation forecast for the end of 2025 as its interim target for the year, with interim targets of 16 percent and 9 percent set for 2026 and 2027, respectively. Karahan mentioned that forecasts will continue to be provided in inflation reports. “Interim targets will serve as a reference in determining the endogenous monetary policy path, ensuring that inflation converges to the interim targets within the control horizon,” he noted, emphasizing that this period spans between 12 and 24 months.
He expressed that the bank anticipates inflation stabilizing at 5 percent in the medium term. “During the disinflation process, we will maintain our tight monetary policy stance to achieve our interim targets,” he affirmed.
The lira remained relatively unchanged at 40.79 against the dollar following the report’s publication. Prior to last month’s rate cut, the bank had raised its policy rate to 46 percent from 42.5 percent in April, reversing an easing cycle that began in December, which was prompted by market volatility surrounding the arrest of Istanbul Mayor Ekrem Imamoglu in March, who is the primary rival of President Tayyip Erdogan.
Read more: Türkiye’s central bank surprises markets with key interest rate cut to 43 percent
Drivers of inflation changes
The Central Bank of the Republic of Türkiye (CBRT) clarified that the adjustment in the 2026 inflation forecast from 12 percent to 16 percent is linked to rising food prices, underlying inflation trends, and import price pressures denominated in Turkish lira. The Bank underscored the necessity of sustaining domestic demand at disinflationary levels through monetary policy measures, coordinating fiscal policy to bolster disinflation, and fostering a real appreciation of the lira alongside improved inflation expectations. Governor Karahan stressed the importance of maintaining a tight monetary policy stance and effective liquidity management to achieve the targeted reduction in inflation.
Additionally, official statistics from the Turkish Statistical Institute (TurkStat) indicated that inflation eased to 33.52 percent in July 2025, the lowest level since November 2021, and continued a trend of gradual disinflation following the sharp peak in mid-2024. The decline in inflation was widespread across categories such as food and non-alcoholic beverages, housing, health, communications, and services including hotels and restaurants. However, certain sectors like transport and clothing experienced slight increases in inflationary pressures. This situation has prompted the central bank to cautiously resume its monetary easing cycle, beginning with the 300 basis points rate cut in July, clearly signaling that any further rate adjustments will hinge on future inflation outcomes and economic conditions.
