Turkey Raises Inflation Forecasts, Closing Gap With Markets

Turkey’s central bank raised its inflation forecasts for this year and through 2026, bringing them closer to market expectations after price gains exceeded estimates for two consecutive months.

The latest outlook shows officials see inflation finishing this year at 44% and then reaching 21% by the end of 2025, up from their previous estimates of 38% and 14%, respectively. The revision, “though not ideal, is not a serious deviation” and the bank expects price growth at 38% in March, Governor Fatih Karahan said Friday in the capital Ankara.

The forecasts amount to short-term goals for the monetary authority as it tries to achieve the official target of 5% in the longer term.

Karahan, a former New York Fed economist and policy adviser, appeared to be optimistic on the slowing levels of domestic demand as well as improvement in services inflation, which has been particularly sticky. Rent prices, the main reason of that stickiness, is seen slowing in the fourth quarter, he said.

By contrast, inflation expectations — a key pillar of the central bank’s policy — are not at the “desired levels,” according to the governor.

During a question-and-answer session following his presentation, the governor refrained from providing any specific guidance on the timing of possible interest-rate cuts. However, the central bank’s sizable revisions to the forecasts don’t imply a change in its policy stance in either direction, he said.