Turkey keeps inflation forecast unchanged at 24%

Turkey’s central bank kept its year-end inflation forecast steady at 24 per cent on Thursday, with Governor Fatih Karahan signalling readiness to raise interest rates again if inflation risks intensify.

Presenting the quarterly inflation report in Istanbul, Karahan said the tight monetary stance would remain in place, and additional measures would be taken if demand pressures threaten the disinflation outlook. He added that recent policy steps had helped curb inflation expectations and that inflation would continue to fall in the remainder of 2025.

Last month, the bank raised its benchmark rate by 350 basis points to 49 per cent, reversing a previous easing cycle, in response to market turbulence triggered by the March arrest of Istanbul Mayor Ekrem Imamoglu. The lira had weakened sharply but firmed slightly to 38.85 per dollar during Thursday’s briefing.

The central bank also maintained its inflation forecasts for end-2026 and end-2027 at 12 per cent and 8 per cent, respectively.

Karahan noted that policy flexibility remains, including raising the funding rate above the benchmark if needed. He said slower economic growth is expected due to the tighter stance, which would support disinflation.

Following foreign outflows and a $57 billion drop in reserves after the March turmoil, the bank resumed forex purchases this month as inflows returned.

Attribution: Reuters

Subediting: Y.Yasser