Amid the impact of the conflict in Iran, Turkey’s economic stability program is under increasing pressure, prompting its central bank to significantly raise the annual inflation target.
On Thursday, the Central Bank of Turkey raised its 2026 inflation target from 16% to 24%, nearly doubling next year’s target to 15%, while suspending the publication of inflation range forecasts due to heightened uncertainty.
Nearly three-quarters of Turkey’s energy needs depend on imports, making it highly vulnerable to chain reactions in energy markets triggered by the conflict in Iran.
A survey by the Central Bank of Turkey showed that local residents expect consumer prices to rise by 52% this year, while businesses anticipate a 33% increase. Investment banks such as JPMorgan and Deutsche Bank predict Turkey’s inflation rate will reach 30% in 2026.
Against the backdrop of the Central Bank of Turkey abandoning its previous inflation targets, the country’s trade balance has continued to deteriorate—a trend that was evident even before the outbreak of conflicts between the U.S. and Iran, and Israel and Iran. Exporters have also complained that the lira exchange rate is overvalued. In March, geopolitical tensions triggered a sell-off of global emerging market assets, causing Turkey’s foreign exchange reserves to plummet by $43 billion in a single month, marking the largest decline in history.
The governor of the Central Bank of Turkey stated on Thursday that the bank has no plans to adjust its monetary policy stance in the short term, with the benchmark interest rate remaining at 37%.
The governor stated: “We believe that the current policy stance remains appropriate until uncertainties dissipate. Looking ahead, all policy options are under consideration.”