Published on Friday, June 5, 2026

Türkiye | Inflation Moderates, Challenges Persist

Summary

Consumer inflation materialized at 1.7% m/m, in line with our expectation, bringing annual inflation to 32.6%. Assuming a gradual reopening of Strait of Hormuz and some normalization in energy prices in 2H26, we maintain our year-end CPI forecast at 30%, while acknowledging upside risks amid war-related uncertainty

Key points

Key points:
Food and energy prices dragged headline CPI lower, while core inflation eased only modestly, largely reflecting seasonal pressures in clothing prices. According to our calculations, seasonally adjusted CPI (1.9% vs. 3.4% prev.) decelerated mainly on food and energy, whereas core inflation (sa, 2.2% vs. 2.5% prev.) remained relatively sticky due to ongoing inertia in services inflation.
Trend inflation indicators point to limited improvement, while their 3-month moving averages retreated only to the levels observed before the conflict in February. The 3-month moving average of median inflation, closely monitored by the CBRT, stood at 2.15%, implying an annualized CPI of 29%. Therefore, the data is neither particularly encouraging from an expectations standpoint nor does it point to further deterioration following the unexpected price adjustments in April.
Cost-push pressures remain elevated, as PPI exc. food continues to imply monthly price increases of around 3%. Persistent inflation inertia, highly unanchored inflation expectations, uncertainty surrounding the conflict, and elevated energy price volatility remain key risks to the disinflation path.
Considering the risks to both price and financial stability, we expect the CBRT to raise the policy rate to 40% at next week’s MPC meeting. However, given the still-limited dollarization tendency and the recent tightening of credit growth caps, we do not rule out the possibility of a pause. Even so, we believe the CBRT should stay tight for longer.
Given downside risks to the external balance, we expect growth-supportive policies to remain limited. Assuming 3% growth, a gradual reopening of the Strait of Hormuz in 2H26, and average oil prices of USD 90/bbl in 2026, we maintain our year-end inflation forecast at 30%.