, an Ankara-based think tank, has called on Turkey’s central bank to explain why inflation is likely to exceed its official target and what measures it plans to take, citing a requirement under the Central Bank Law.){kind=link}
The Economic Policy Research Foundation of Turkey (TEPAV), an Ankara-based think tank, has called on Turkey’s central bank to explain why inflation is likely to exceed its official target and what measures it plans to take, citing a requirement under the Central Bank Law.
In a June monetary policy note, TEPAV said current conditions point to inflation at the end of 2026 coming in well above the central bank’s revised target.
The warning came as Turkey continues to struggle with inflation of more than 30 percent despite tight monetary policy.
Turkey’s annual consumer inflation stood at 32.6 percent in May, according to official data, while monthly inflation was 1.7 percent.
TEPAV said annual inflation has remained in a narrow range between 30.9 percent and 33.5 percent for the last 11 months, showing that the fall in inflation has stalled.
The group said inflation expectations have not yet settled around the official target, feeding price-setting habits that make inflation harder to reduce.
TEPAV also cited the war in the Middle East, saying uncertainty over energy, commodities and international shipping costs was adding pressure to prices.
The Turkish Central Bank in May raised its interim inflation target for the end of 2026 to 24 percent from 16 percent, citing the effect of the war on energy and transport costs. It also set interim targets of 15 percent for 2027 and 9 percent for 2028, while keeping its medium-term target at 5 percent.
Under Article 42 of Turkey’s Central Bank Law, the bank must inform the government and the public of the reasons for any deviation from inflation targets and the measures to be taken when a deviation occurs or becomes likely.
TEPAV said this provision now requires a public explanation because the 2026 target appears likely to be missed.
The think tank also criticized the broader economic program, saying its main problem was that it still had gaps and had failed to remove doubts about its durability.
It said economic stability required a justice system that works fairly and quickly, a stronger rule of law and more respect for democratic values.
TEPAV also called for a new development strategy that could gain support from broad segments of society.
It said fiscal policy should support the fight against inflation through tax reform, measures against the informal economy, changes in public spending and steps to reduce the budget deficit.
The note recommended that the central bank keep its current monetary policy framework in place, with the overnight lending rate at 40 percent, the one-week repo rate at 37 percent and the overnight borrowing rate at 35.5 percent.
The central bank did so on Thursday, keeping its policy rate at 37 percent and leaving the overnight lending and borrowing rates unchanged at 40 percent and 35.5 percent, respectively.
The bank said the underlying trend of inflation declined slightly in May but that energy prices remained volatile and high because of geopolitical uncertainty.
It said first-quarter data pointed to a slowdown in economic activity and that domestic demand remained weak.
The central bank also said it would keep monetary policy tight until price stability is achieved and would tighten policy further if there is a significant and lasting deterioration in the inflation outlook.