The Central Bank of Turkey has raised its inflation forecast for the end of 2026 to 26%, attributing the revision to the impact of the war in the Middle East, rising energy prices and growing uncertainty about the global economy. The institution also warned that tensions arising from the war with Iran will continue to drive inflationary pressure, at least in the short term.
During the presentation of the second inflation report of the year, the governor of the Turkish Central Bank (TCMB), Fatih Karahan, stated that recent geopolitical tensions have driven up the price of energy and food, negatively affecting the process of disinflation, although he assured that the bank would maintain its commitment to price stability. “The war, and the uncertainty it has generated, have negatively affected the disinflation process, but this will not change our determination to achieve price stability,” Karahan said in comments reported by Turkish media.
The Central Bank chief also announced a revision of the Central Bank’s interim inflation targets: “We have raised our interim inflation targets to 24%, 15% and 9% for 2026, 2027 and 2028, respectively. We estimate that inflation will be 26% by the end of 2026, 15% by the end of 2027 and 9% by the end of 2028,” Karahan said during the presentation of the report.
The governor explained that the war that began in late February has driven up prices of oil, natural gas and other commodities, effects that were quickly passed on to energy and transport costs. “Developments between Iran and the United States have ushered in a difficult period for central banks. In this environment, we have seen the impact of the war on energy and transport prices and, consequently, on inflation. Although the duration of tensions in the region remains the most fundamental issue, we believe that inflationary effects will remain strong in the short term,” he noted.
In 2026 there will be a slowdown in global economic growth
Karahan, who pledged to use all the tools at the TCMB’s disposal to achieve price stability, added that the closure of the Strait of Hormuz poses a threat to supply chains; he also stated that energy prices remain high and that non-energy prices are also rising, albeit at a slower pace. Furthermore, he noted that many economies, and not just those in countries within the region affected by the war itself, have had to revise their growth forecasts downwards. On the other hand, a slowdown in global growth is expected in 2026, which will reduce external demand for Türkiye.
The governor also indicated that industrial production has remained virtually stagnant for two quarters, whilst capacity utilisation barely increased in the first quarter and remained flat in April. As he explained, the data for April – a month in which the CPI reached 32.4% – also reflected persistent weakness in credit card spending, while there was a significant increase in energy imports in March.
Karahan emphasised that the tensions arising in the Middle East in late February 2026 have caused negative disruptions to supply and have become the main factor shaping the short-term inflation outlook. He also highlighted the impact of food prices. “Consumer inflation, which remained within our forecast range during February and March, exceeded that range in April as the effects of the tensions became more evident,” he stressed.
Rising food and energy prices drive up the CPI
As for energy inflation, which had been slowing for some time, it rose by 19 percentage points over the last two months to reach 47%, driven mainly by oil and natural gas. Karahan also noted that electricity and gas tariffs were updated following the rise in costs, and that the introduction of a phased pricing system for residential gas led to a sharp increase in tariffs.
Food prices also contributed to the rise in inflation during the first few months of the year, particularly due to volatility in the cost of fresh fruit and vegetables following adverse weather conditions in Turkey, including droughts and frosts. However, Karahan stated that early indicators for May point to falls in vegetable prices thanks to the normalisation of supply conditions, which could ease food inflation in the coming months.
Furthermore, despite pressure from energy and food, the governor highlighted that inflation continued to moderate in services and basic goods thanks to the restrictive monetary policy pursued by the Turkish Central Bank. He also noted that rental prices and education costs, which had kept services inflation high throughout 2025, are beginning to show signs of slowing down.
Karahan also recalled that the Central Bank of Turkey cut its benchmark interest rate by 100 basis points to 37% in January, although it subsequently adopted a tighter monetary stance, keeping rates unchanged in March and April in the face of increased uncertainty over the war in Iran and rising inflation forecasts. “I wish to reiterate that we will maintain our restrictive monetary policy stance until price stability is achieved, in line with our objectives,” the governor concluded.
VOTE
EDITORIAL TEAM
🧿 About us
.
Edited and reviewed by:
Pablo Gómez is a specialist in Turkey and has been editor-in-chief of Hispanatolia since 2011. He has been analysing current affairs and geopolitics in Turkey and the surrounding region since 2006.
…
📣 Your ADVERTISING on Hispanatolia
.
🤗 HELP US WITH A DONATION:
💗 Paypal
