CBRT Hiked its End-Year Inflation Forecast to 26% Amid Economic Pressures
Bottom Line: Central Bank of Turkiye (CBRT) released its second quarterly inflation report of the year on May 14, and hiked its end-year inflation target to 26% for 2026, 15% for 2027 and 9% for 2028 citing the impact of the war in the region, higher energy prices and increased uncertainty over the global outlook. The CBRT shifted its communication approach amid high uncertainty, replacing forecast ranges with baseline point forecasts and a breakdown of major risks. We continue to feel the stickiness in inflation, deteriorated pricing behaviour, food and commodity price volatility, adverse geopolitical impacts and expected hikes in government spending before the upcoming elections will likely lead inflation to stay higher than CBRT’s expectations.
Figure 1: CPI, Core Inflation (YoY, % Change) and Policy Rate (%), January 2018 – April 2026
Source: Continuum Economics
Central Bank of Turkiye (CBRT) released its second quarterly inflation report of the year on May 14, and hiked its end-year inflation target to 26% for 2026, 15% for 2027 and 9% for 2028 citing the impact of the war in the region, higher energy prices and increased uncertainty over the global outlook. The inflation report mapped out a gradual path toward CBRT's medium-term objective of 5% inflation.
Speaking about the inflation trajectory, CBRT governor Karahan highlighted that "While the central question before us is how long the regional tensions and pressures on energy supply will persist, we assess that the related inflationary effects will remain pronounced in the short term." Karahan said that how long the tension lasts are a critical risk factor in terms of the inflation outlook, and added that despite pressure from energy and food, inflation continued to decline in services and core goods thanks to tight monetary policy.
According to second quarterly inflation report, the regulator revised its interim targets upward to 24% for 2026, 15% for 2027 and 9% for 2028, citing extraordinary updates to assumptions after the geopolitical shock. Due to high market uncertainty, the CBRT has adjusted its communication strategy and will now publish specific point forecasts for its baseline scenario alongside an overview of key risks instead of providing forecast ranges.
We continue to feel the stickiness in inflation, deteriorated pricing behaviour, food and commodity price volatility, adverse geopolitical impacts and expected hikes in government spending before the upcoming elections will likely lead inflation to stay higher than CBRT’s expectations. We anticipate a volatile path toward achieving single-digit inflation by 2028, given the current economic climate and the complicating factor of the 2027/28 election cycle.