Central Bank Governor Fatih Karahan speaks at event in the capital Ankara as he presents the bank’s third quarterly inflation report of this year. (İHA photo)
The Central Bank of Türkiye governor signaled on Aug. 13 that the monetary authority will maintain a strict policy stance despite a minor easing in consumer prices, warning that volatile global energy markets and elevated food costs threaten the country’s disinflation path.
Speaking in Ankara as he presented the Central Bank’s third quarterly inflation report of 2026, Gov. Fatih Karahan addressed the state of the economy following the release of official July inflation figures.
According to the Turkish Statistical Institute (TÜİK), Türkiye’s annual consumer price index (CPI) edged down slightly to 31.75 percent in July from 32.11 percent in June, with monthly prices rising 1.78 percent, coming in below market expectations.
Despite the modest cooling, Karahan cautioned that external supply shocks continue to create headwinds for price stability.
“Geopolitical developments that stood out in the course of the disinflation process this year have maintained their volatile path since the May Inflation Report,” Karahan said.
“We are proactively monitoring the impacts of these developments on the inflation outlook.”
Karahan reaffirmed the bank’s multi-year projections, targeting year-end inflation of 26 percent in 2026, 15 percent in 2027 and a return to single digits at 9 percent by 2028.
The governor emphasized that an initial easing of international tensions earlier in the summer quickly gave way to renewed market volatility, pushing energy import costs higher.
“Following the agreement reached between the U.S. and Iran in June, we observed a temporary decline in geopolitical risks,” Karahan explained.
“In the subsequent period, geopolitical risks exhibited a volatile pattern due to news flow regarding the course of the war and the possibility of a new agreement. As a result of increased uncertainties accompanying geopolitical developments, energy prices rose again in July. Leading indicators point out that these effects are spilling over into August as well.”
Karahan also highlighted stubborn food costs as a primary concern. TÜİK data showed food and non-alcoholic beverage prices climbing 37.53 percent year-over-year in July, despite broader improvements in agriculture.
“Despite the overall improvement in the food production outlook, the negative divergence in food inflation became more pronounced,” Karahan noted, adding that earlier energy and petrochemical shocks drove up second-quarter costs for core goods.
On the domestic front, Karahan credited the Central Bank’s prolonged monetary tightening with dampening consumer demand and curbing broader price spikes. Core inflation, which excludes energy, food, alcohol, tobacco and gold, stood at 29.91 percent year-over-year in July, rising 1.80 percent on a monthly basis.
“The slowdown in consumption demand brought about by tight monetary policy was an important factor limiting the rise in core goods inflation,” Karahan said. “In July, we saw a decline in the underlying trend of inflation led by distribution-based indicators.”
He added that service inflation, particularly in housing rentals and education, continues to decelerate gradually despite elevated headline costs.
