Inflation Edged Up to 31.5% y/y in February as Monthly Pressures Persist
Bottom line: Turkish Statistical Institute (TUIK) announced February inflation figures on March 3. After hitting 30.7% annually in January, Turkiye’s inflation surged to 31.5% in February due to rising food, transportation and housing prices. Our average inflation forecast for 2026 stands at 26.5% due to fragile pricing behavior and stubborn food and housing prices. We now assess Central Bank of Turkiye (CBRT) will likely halt its easing cycle during the MPC on March 12 due to adverse geopolitical developments, sticky domestic inflation and recent hikes in oil and gas prices after U.S./Israel attacks to Iran.
Figure 1: CPI, Core Inflation (YoY, % Change) and Policy Rate (%), January 2015 – February 2026
Source: Continuum Economics
Turkish Statistical Institute (TUIK) announced February inflation figures on March 3. After hitting 30.7% annually in January, Turkiye’s inflation surged to 31.5% in February due to rising food, transportation and housing prices. February data marked the second inflation reading of the year since TUIK rebased the index, revised basket categories, and adjusted index weights in early 2026.
According to TUIK’s announcement on March 3, education prices recorded the highest annual increase with 55.8% YoY followed by housing prices were up by 42.3%. Annual food and non-alcoholic beverages prices also soared by 36.4%. Prices rose at a slower pace across a number of categories, such as footwear and clothing, which came in at 6.8% YoY in February. Monthly inflation edged up by 3.0% in February while annual core inflation stood at 2.2% monthly and 29.9% annually.
The inflation expectations remain elevated in Turkiye while TRY continues to devaluate against the USD a trend underscored by the CBRT’s release of its inaugural Household Expectations Survey on February 24. This survey revealed that households' 12-month-ahead inflation expectations held steady at 48.8%, while their expectation for the USD/TRY exchange rate reached 51.56 over the same period.
In its first Inflation Report of 2026, the CBRT maintained its official interim target of 16%. However, the regulator notably shifted the forecast range upward to 15%–21% (from the previous 13%–19%). Additionally, the bank raised its 2026 food inflation forecast from 18% to 19%.
Given the CBRT's 5% medium-term inflation target, we think adverse geopolitical developments, sticky domestic inflation and recent hikes in oil and gas prices after U.S./Israel attacks to Iran, we believe the CBRT must navigate interest-rate adjustments with caution, adopting a meeting-by-meeting approach. Under current circumstances, we assess CBRT will likely halt its easing cycle during the MPC on March 12 due to risks. Any further potential upside surprises in food and energy prices, alongside any accelerated TRY depreciation, could derail the recovery.
We assess that inflation is likely to remain above the CBRT’s upper forecast band by year-end. Our average inflation forecast for 2026 stands at 26.5%, reflecting ongoing risks such as fragile pricing behavior and stubborn prices.