Turkey’s central bank on May 14 raised its end-2026 official inflation "forecast" to 26% in its latest quarterly inflation report from the previously stated range of 15-21% provided in the previous report released in February.

It is not advisable to plan, price or draw inferences based on Turkey’s official data. There is widespread concern about the reliability of the country’s data series.

Forecast range removed due to supply shock

In August 2025, the authority introduced a new term, namely “interim targets”. In its latest report, it also hiked its end-2026 “interim target” for annual inflation to 24% from 16%.

The official inflation target remains untouched at 5% y/y.

Since its introduction, the “interim target” concept has been criticised for being null as the given figures have consecutively fallen outside of the “forecast range”.

The criticism will now be muted as the authority has scrapped its forecast range. The “interim target” that stands at 24% is still, meanwhile, below the “forecast” that stands at 26%.

“The war and high uncertainty environment that we are currently experiencing are prompting the reconsideration of the ‘communication of uncertainty around forecasts’, along with the revisions in interim targets,” central bank governor Fatih Karahan said during a press conference.

“Looking back at recent years, it is notable that, during such complex shock environments, many central banks have suspended the use of forecast band approaches in their communication,” he added.

End-2026 expectations move above 30%-level

Even prior to the February 28 US/Israeli sudden attack on Iran, the inflation realisation was expected to come in at above the 20%-level at end-2026.

Since then, financial institutions’ forecasts have been breaking through the 30%-level over the course taken by oil prices.

On August 13, the central bank will release its next quarterly inflation report, the third of 2026. It will include updated forecasts and updates on war impacts.

On May 4, the Turkish Statistical Institute (TUIK, or TurkStat) said that Turkey’s consumer price index (CPI) inflation officially edged up from 30.87% y/y in March to 32.37% in April.

Oil price forecast lifted to $89

The central bank also hiked its average Brent oil price forecast for 2026 to $89 from the $60s per barrel provided in the February report.

Based on the central bank’s previous estimates, the authority calculates a headline inflation increase of about 0.8pp per each 10% increase in the Brent oil price.

On April 1, Turkey’s finance minister, Mehmet Simsek, delivered a presentation to the finance industry in London. His slides showed that Turkey’s economy officials were working with an expected $85 per barrel average Brent oil price in 2026, which would add between 3.6 and 4.4 percentage points to end-2026 annual inflation.

Even an average of $89 is still seen as too optimistic amid Brent prices registering above $100. In the August inflation report, further updates will arrive.

Recovery in place, stress continues

The USD/Turkish lira (TRY) pair remains under control. After the April 8 Iran war ceasefire was declared, portfolio inflows to Turkey resumed.

Under particular scrutiny are carry trade flows. Across the two weeks between April 17 and April 30, around $4bn worth of carry outflows were observed (see the table below).

In the week between April 30 and May 8, about $3bn of carry inflows were reported. That proved a relief as outflows lasting two weeks had created stress.

Table: Portfolio flows to Turkey post-February 28, the date the latest conflict with Iran started.

Between February 27 and March 31, the central bank’s net reserves net of off-balance sheet items deteriorated by more than $62bn. Between March 31 and May 8, the position recovered by $22bn.

June 11, next MPC meeting

On April 22, the monetary policy committee (MPC) of Turkey’s central bank left its main policy rate (one-week repo) unchanged at 37% in line with expectations.

On June 11, the MPC will hold its fourth rate-setting meeting of the year. Currently, no change is the main expectation.

Depending on developments in portfolio inflows, the revival of the rate-cutting cycle with a 100-bp move or a shift to tightening with a 100-bp hike could both be on the cards.