Published on Friday, July 3, 2026 | Updated on Friday, July 3, 2026

Türkiye | A Better Print, A Tough Trend

Summary

Consumer inflation rose 1.0% m/m in June, in line with our expectations, bringing annual inflation down to 32.1%. Despite lower energy prices and the postponement of the SCT hike on fuel, the unexpected July hike in health examination fees reduces the limited downside risk to our 30% year-end inflation forecast.

Key points

Key points:
The decline in headline CPI was mainly driven by easing core inflation. However, seasonally adjusted monthly CPI remained broadly unchanged at 1.8%, while its 3-month trend eased only slightly.
Seasonally adjusted core C inflation fell to 1.97% m/m (vs. 2.15% previously). Despite weaker demand, recent acceleration in currency depreciation and unanchored expectations appear to have kept core goods inflation at 1.5% m/m, with its 3-month trend rising to its highest level (1.8% m/m) since Jan25. Excluding transport services, services inflation showed no meaningful improvement.
The average of the six trend inflation indicators fell only marginally to 2.05% m/m in June (vs. 2.18% previously), while its 3-month average remained unchanged at 2.26%. Similarly, median inflation edged down to 1.93%, while its 3-month trend stayed at 2.12%, the highest level since May25. Moreover, excluding food and energy, the inflation distribution has not changed meaningfully.
The postponement of the SCT adjustment on fuel prices in 2H26 and the sharp decline in energy prices have improved the balance of risks to inflation, albeit only to a limited extent. Elevated and unanchored inflation expectations, persistent inertia, and an unfavorable underlying trend remain key challenges to the disinflation process.
If Brent oil prices remain in the USD 70–75/bbl range in 2H26, this could create around a 1pp downside risk to our year-end CPI forecast. Yet, the recent hike in healthcare prices may partly offset it. We maintain our 30% year-end inflation forecast, while acknowledging a modest downside bias. A rapid monetary policy easing could hinder the disinflation process. We expect the CBRT to gradually lower the funding rate, while further improvement in inflation may create limited downside risk to our 37% year-end policy rate forecast.