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Türkiye’s headline inflation is expected to anchor at 29% by end-2026, while the Central Bank of the Republic of Türkiye (CBRT) is not expected to change its policy rate at the next monetary policy meeting, according to U.S.-based investment bank Citigroup.
The bank's economists said in a note on Friday that risks are tilted to the upside amid the ongoing Iran war, arguing it has added fresh pressure to the macroeconomic environment and deepened uncertainty around price stability.
The bank's economists argued that currency stability alone may not be enough to ease inflation expectations. A mix of persistent energy costs, dollarization risks, weaker growth prospects, and rising competition concerns is shaping a more demanding backdrop for policymakers, they asserted.
The Turkish central bank's net sellings from its reserves topped $56 billion during the first four months of the conflict to curb currency demand and stabilize the Turkish lira. The bank also launched dollar for Turkish lira and dollar for gold swap auctions as well as partially divesting its gold holdings.
Looking ahead, Citi expects no rate change at the April meeting. However, the bank signals that further tightening could still come into play if pressure on reserves persists or if domestic deposit behavior begins to shift.
Inflation eased to 30.9% in March, with monthly price growth coming in at 2%, below expectations. Transport costs rose as energy prices climbed, though the increase remained contained at 4.5% due to Türkiye’s sliding-scale fuel tax system.
Still, the broader picture remains strained. As a major energy importer, Türkiye faces sustained pressure from high oil prices, which continue to feed into consumer prices.
Central Bank Governor Fatih Karahan recently pointed out that every 10% rise in Brent crude adds 1.1 percentage points to headline inflation. With oil hovering near $110 per barrel, that implies a potential 5.5 percentage point impact, underlining how sensitive the outlook is to external shocks.
The next Monetary Policy Committee meeting is scheduled for April 22.
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