Turkey's Central Bank Raises 2026 Inflation Forecast to 28% as Import Costs Climb, Holds Rate at 37%

Türkiye's central bank now expects consumer prices to be 28% higher at the end of 2026 than a year earlier, up from its previous forecast of 26%. The revision came in the bank's third quarterly Inflation Report of the year, presented in Istanbul on August 13 by Governor Fatih Karahan.

Despite raising its own forecast, the bank kept its official interim inflation target for the end of 2026 unchanged at 24% — meaning it still expects to undershoot its forecast through policy tightening, even though its economists think 28% is now more likely without further action. Targets for 2027 (15%) and 2028 (9%) were also left unchanged.

Karahan pinned the higher forecast on rising assumptions for how much Turkish lira it will take to import diesel, natural gas and other commodities — costs shaped in part by ongoing regional conflict. The bank's benchmark one-week repo rate stays at 37%, unchanged since a hold decision on July 23, its fourth consecutive pause. Turkish annual inflation was 31.75% in July, still more than six times the bank's eventual 5% target.

A forecast revision, not a rate move

The CBRT's Monetary Policy Committee did not meet on August 13 — the bank's rate-setting meetings run on a separate calendar from its quarterly Inflation Reports. Turkey's policy rate has been unchanged at 37% since the Committee's July 23 meeting, its fourth straight hold after an easing cycle was paused when regional conflict began at the end of February. The overnight lending and borrowing rates were also left at 40% and 35.5% respectively at that meeting. What changed on August 13 was the bank's own economic forecast, presented by Governor Fatih Karahan and Deputy Governor Gazi İshak Kara in a public briefing in Istanbul, alongside a companion analysis of the drivers of Turkish inflation.

Why the forecast moved

Karahan said the two-point increase in the end-2026 forecast, from 26% to 28%, was driven by a higher assumption for lira-denominated import prices, specifically citing developments in diesel oil, natural gas and other commodity prices. Turkey imports the large majority of its energy, so a weaker lira or higher global energy prices both raise the cost of imported fuel and, through it, domestic prices for transport, manufacturing and heating. The bank's report follows a stretch in which regional conflict has kept energy markets volatile, a dynamic the CBRT explicitly flagged as a channel it is 'closely monitoring' in its July rate statement.

A forecast above its own target

The gap between the CBRT's 28% forecast and its own 24% interim target for the same date is worth pausing on. Central banks typically set an interim target as the outcome they are steering policy toward, while a forecast reflects what their models expect to actually happen given current settings and assumptions. A forecast running four points above the target signals that, on the CBRT's own numbers, current policy is not yet tight enough to hit what it has told markets to expect — though the bank reiterated it 'will ensure the tightness required by the projected disinflation path in line with the interim targets,' language that leaves the door open to further tightening steps if the gap doesn't close on its own.

Where inflation actually stands

Turkey's official annual consumer price inflation, reported by the Turkish Statistical Institute (TÜİK), eased slightly to 31.75% in July from 32.11% in June, even as prices rose 1.78% on the month, up from June's 0.99% monthly reading. That combination — a lower annual rate but a faster monthly pace — is consistent with Karahan's own comments that the underlying trend was expected to tick up temporarily in July after easing in June. At roughly 32%, Turkey's inflation rate remains among the highest of any G20 economy, a legacy of the unorthodox low-rate policies the CBRT abandoned in 2023 in favor of the current tightening cycle, now in its fourth year.

Reader questions

Did Turkey's central bank raise interest rates on August 13?

No. August 13 was the publication date of the CBRT's quarterly Inflation Report, not a rate-setting meeting. The policy rate has been unchanged at 37% since the Monetary Policy Committee's July 23 decision.

What's the difference between the CBRT's forecast and its target?

The target (24% for end-2026) is the outcome the bank is steering policy toward. The forecast (28%) is what its economists currently expect to happen given existing policy settings and price assumptions. A forecast above target implies the bank sees current policy as not yet sufficient on its own.

Why does an import-price assumption move an inflation forecast so much?

Turkey imports most of its energy. When the lira-denominated cost of diesel, natural gas and other commodities rises — whether from a weaker lira or higher global prices — that cost flows into transport, manufacturing and heating prices across the economy, feeding directly into the CPI basket.

Is Turkish inflation getting better or worse?

Mixed, by the CBRT's own account. The annual rate eased slightly to 31.75% in July from 32.11% in June, but the monthly pace accelerated to 1.78% from 0.99%, and the bank's own year-end forecast just moved up, not down.

When is the CBRT's next rate decision?

The Monetary Policy Committee's next scheduled meeting is September 10, 2026, per the bank's published 2026 calendar.