Inflation expectations for end-2026 deteriorate, shows Central Bank survey

ANKARA

The Central Bank’s monthly Survey of Market Participants showed on May 15 that expectations for year-end 2026 consumer inflation rose to 28.94 percent, up from 27.53 percent in the previous survey period.

Meanwhile, the 12-month-ahead inflation expectation edged up to 23.82 percent from 23.39 percent and the 24-month-ahead CPI forecast increased to 18.43 percent from 18.02 percent.

The Survey of Market Participants monitors the expectations of decision-makers and experts in the financial and real sectors regarding various economic variables.

The Turkish Central Bank on May 14 raised its year-end inflation forecast for 2026 to 26 percent, citing war-driven increases in energy prices, transportation costs and global uncertainty.

Speaking at a press conference in Istanbul to present the bank’s second Inflation Report of the year, Governor Fatih Karahan said inflation is expected to fall to 15 percent at the end of 2027 and 9 percent at the end of 2028 before stabilizing at the medium-term target of 5 percent.

Karahan said the bank revised its interim targets for 2026, 2027 and 2028 to 24 percent, 15 percent and 9 percent, respectively, as “extraordinary geopolitical developments” required major changes to its assumptions.

Annual consumer inflation stood at 32.4 percent in April, while annual energy inflation rose by 19 percentage points over the past two months to 47 percent, mainly due to oil and natural gas prices, Karahan said.

He said inflation expectations had not declined as much as desired and remained above the bank’s forecasts, with potential second-round effects from geopolitical developments posing a key risk.
Karahan said the bank’s forecasts assume monetary policy will remain tighter for longer than during the previous reporting period.

The bank’s survey on May 15 also showed that participants revised down their expectations for Türkiye’s GDP growth in 2026 to 3.3 percent from 3.5 percent. Meanwhile, the 2027 growth forecast remained unchanged at 4.1 percent.

Participants’ expectations for the year-end exchange rate (U.S. dollar/Turkish Lira) rose to 51.57, up from 51.23 in the previous survey period. The 12-month-ahead exchange rate forecast also increased to 54.69 from 53.62.