Inflation forecast up, but easing hopes alive

TURKEY - In Brief 13 Aug 2026 by Murat Ucer

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The CBRT released its third Inflation Report of the year today. The Bank once again revised its end-2026 inflation forecast upward, to 28% from 26%, while keeping its year-end interim target unchanged at 24%. Its forecasts for 2027 and 2028, which also serve as interim targets, were left unchanged at 15% and 9%, respectively. During the presentation, Governor Fatih Karahan also outlined the changes in the key assumptions underlying the revision to the 2026 forecast. The global growth assumption was lowered to 1.6% from 1.7% in the previous report, while the oil price assumption was revised slightly downward to $87.8 from $89.4. By contrast, the assumption for the annual increase in import prices was raised to 6.9% from 6.3%. The CBRT also increased its end-2026 food inflation forecast to 28.5% from 26.3% (see Slide 46 here for details). During the Q&A session, Governor Karahan stressed that the upward revision did not signal a deterioration in the underlying inflation trend and therefore, did not warrant a direct monetary policy response because it was driven by supply-side factors, i.e., developments outside the direct influence of monetary policy. Consistent with this reading of inflation dynamics, Karahan also noted that a return to one-week repo auctions – and therefore a reduction of rates to 37% from 40% currently -- was on the agenda, as they will be watching market dynamics. We would not be surprised if the Bank did indeed try to shift to weekly funding at least partially in the next few weeks, as it closely watches reserve and local depositor behavior. Our econ author is in transit today and suffering from a terrible internet connection. We will release a macr...