Türkiye’s Central Bank has revised its year-end inflation forecast for 2025, now expecting annual consumer inflation to reach 24%, a 3-percentage point increase from its previous projection.

However, the bank maintained its 2026 forecast at 12%, as announced by Governor Fatih Karahan during the release of the institution’s first inflation report of the year on Friday.

Governor Karahan attributed the upward revision to factors beyond the control of monetary policy. "The forecast revision for 2025 was driven by factors that are relatively beyond the control of monetary policy," he stated. Key influences included an increased weight for the services group in the Consumer Prices Index (CPI) basket, adjustments in food inflation due to unprocessed food pricing, and higher co-payments by patients for medical examinations.

Despite the revised forecast for 2025, Karahan stressed that the adjustment does not indicate any easing in the bank’s monetary policy stance. “We kept our 2026 forecast unchanged within a context where the probable secondary effects of the revision in our 2025 forecast through expectations will be offset by the tight monetary stance,” he explained.

Looking further ahead, the Central Bank projects that inflation will ease to 8% by 2027, with a long-term goal of stabilizing inflation at 5%. The governor reaffirmed the bank’s commitment to its disinflation strategy, which includes maintaining tight financial conditions, encouraging moderation in domestic demand, and fostering the real appreciation of the Turkish lira.

Recent data from TurkStat indicates that Türkiye's annual inflation rate fell to a 19-month low of 42.12% in January, marking progress in the disinflation process initiated last January. Karahan emphasized the importance of policy coordination, noting, “The decline in the underlying inflation will continue in 2025 as the stickiness in services inflation weakens and the improvement in inflation expectations become more pronounced. The coordination between monetary and fiscal policies will contribute to the disinflation process as well.”

The Central Bank vowed to maintain its tight monetary policy stance until a sustained decline in inflation is achieved, ensuring long-term price stability for the Turkish economy. (ILKHA)