Inflation Report: First impressions

TURKEY - In Brief 14 Aug 2025 by Murat Ucer

---

The CBRT released the third Inflation Report of the year today with a presentation, as usual, by Governor Karahan. Importantly, the Bank revised the framework through which medium-term forecasts are presented or communicated. Under the new approach, the Bank will separately announce “forecasts,” which may be revised depending on the flow of data, and “interim targets,” which will not be changed unless extraordinary circumstances occur between report periods. (For details, see Zoom In 3.1, p. 57, in the Turkish report here; the full report in English is not yet available, but see Slide 52 at link here for the gist of the changes). In this context, the CBRT kept its interim target for 2025 unchanged at 24% as in the previous report, but projected with 70% probability that yearend inflation would fall within the 25-29% range. The interim target for 2026 was set at 16% (within a range of 13-19%), and the target for 2027 at 9% (see Slide 54 at link above for details). The Bank emphasized that due to easing global uncertainties and inflation declining to lower levels, the forecast ranges have been narrowed compared to the previous reporting period. Key revisions to forecasts, among others, included an upward revision to oil prices for both 2025 and 2026, and an upward revision to food inflation for 2026 to 17% from 13.5% (see Slide 53 at the link above for details). In the Q&A session, Governor Karahan basically remarked -- paraphrasing him a bit -- that the change in the framework was motivated by a desire to improve monetary policy communication and effectiveness. When the forecast and the target are the same as it had been the case until now, the revisions of the target (...