Published on Monday, May 4, 2026

Türkiye | Higher than expected inflation despite pending second round effects

Summary

Consumer inflation came in at 4.2% m/m, above both consensus (3.2%) and our forecast (3.4%), pushing annual inflation up to 32.4%. Elevated energy prices and ongoing supply disruptions due to the prolonged conflict, along with a pro-growth policy stance and worsening expectations, pose upside risks to the inflation outlook.

Key points

Key points:
Headline inflation increased across all subcomponents, while the seasonally adjusted rise was mainly driven by energy, food, and core goods. In core inflation, the deterioration was led by basic goods, while services showed a limited improvement.
Energy prices rose sharply by 14.5% m/m, driven by increases in natural gas and electricity price hikes, as well as elevated global commodity prices. Cost pressures are also strengthening, with manufacturing PPI rising by 3.6% /m and reaching 30.4% on annual basis.
In line with the Central Bank’s expectations, the three-month average trend in CPI inflation showed only a limited deterioration; however, median inflation across all main subcomponents continues to display a worsening trend. According to our calculations, median inflation stood at around 2% in basic goods, 2.6% in services, and 2.4% for overall CPI. Second-round effects from higher commodity prices, supply disruptions, and deteriorating expectations have yet to fully materialize.
In the second inflation report of 2026, which will be released on May 14, the CBRT is likely to revise its 2026 interim target (16%) and forecast range (15–21%) upward. Signals on the future policy stance and underlying assumptions will be key for the inflation outlook.
The prolonged conflict, uncertainties around the normalization process of energy markets, deteriorating inflation expectations and a pro-growth policy stance are all contributing to upside risks to the inflation outlook. Considering today’s print with distorted pricing behavior on goods, increasing risks on higher energy prices for longer, alongside with potential second round effects amid a pro-growth bias, we revise our year-end inflation expectation to 30% (from 28.5%).