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Bank of America (BofA) revised its year-end 2026 inflation forecast for Türkiye to 30% from 28.5% after April price growth came in far above expectations, warning that persistent price pressures are making it harder for the central bank to begin easing monetary policy.
In its Friday report, the bank cited broadening inflationary pressures and a stronger underlying inflation trend, driven largely by elevated oil prices amid the Iran war.
Türkiye's inflation accelerated to 32.4% in April as monthly price growth reached 4.2%, exceeding market expectations of 3.1%. The main driver of the surge was a 12% month-on-month increase in energy prices, while food inflation also accelerated to 3.7%.
Nevertheless, the report noted that the decision of the Central Bank of the Republic of Türkiye (CBRT) to keep interest rates unchanged at its April Monetary Policy Committee meeting, along with its neutral communication afterward, suggested that the threshold for another rate hike remained high.
The report forecast that inflation would peak at around 33% in May before easing to roughly 31% by August, which could open the door for the central bank to normalize funding conditions by reducing the effective funding rate toward the policy rate.
Comments by Central Bank Governor Fatih Karahan during a parliamentary commission presentation emphasized second-round inflation effects and the duration of regional conflicts, but did not signal an imminent rate increase, the report said.
BofA expects the central bank to keep funding costs at the higher overnight rate of 40%, instead of the 37% policy rate, until September while leaving the policy rate unchanged.
However, the report also said it remains difficult to predict when the central bank will return funding costs to the policy rate, as decisions will depend not only on inflation but also on exchange-rate stability, geopolitical developments and reserve dynamics.
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