New inflation strategy from Türkiye central bank aims for 24 percent by end of 2025
During the presentation of the bank's quarterly inflation report in Istanbul, Governor Fatih Karahan indicated that inflation is currently anticipated to range between 25 percent and 29 percent in 2025 and between 13 percent and 19 percent in 2026. 'We have decided to change the framework for presenting medium-term forecasts,' Karahan stated. 'We will present 'interim targets' that will not be changed unless extraordinary circumstances occur between report periods.'
'The 'year-end interim targets' will serve as a commitment and anchor,' he added.
Last month, Türkiye's central bank reduced interest rates by 300 basis points to 43 percent, resuming an easing cycle that had been interrupted by political instability earlier this year, as market conditions have since stabilized and disinflation has persisted. Annual consumer price inflation dropped to 33.52 percent in July, maintaining a downward trend after reaching a peak of 75 percent in May of last year.
Commitment to tight monetary policy
The bank is maintaining its 24 percent inflation forecast for the end of 2025 as its interim target for the year, with interim targets of 16 percent and 9 percent set for 2026 and 2027, respectively. Karahan mentioned that forecasts will continue to be provided in inflation reports. 'Interim targets will serve as a reference in determining the endogenous monetary policy path, ensuring that inflation converges to the interim targets within the control horizon,' he noted, emphasizing that this period spans between 12 and 24 months.
He expressed that the bank anticipates inflation stabilizing at 5 percent in the medium term. 'During the disinflation process, we will maintain our tight monetary policy stance to achieve our interim targets,' he affirmed.
The lira remained relatively unchanged at 40.79 against the dollar following the report's publication. Prior to last month's rate cut, the bank had raised its policy rate to 46 percent from 42.5 percent in April, reversing an easing cycle that began in December, which was prompted by market volatility surrounding the arrest of Istanbul Mayor Ekrem Imamoglu in March, who is the primary rival of President Tayyip Erdogan.
Overview of the Inflation Report 2025-III has been published:
https://t.co/yV1y3a5QsS
pic.twitter.com/6f6av0mz4u
— CentralBankofTürkiye (@CentralBank_TR)
August 14, 2025
Read more: Türkiye's central bank surprises markets with key interest rate cut to 43 percent
Drivers of inflation changes
The Central Bank of the Republic of Türkiye (CBRT) clarified that the adjustment in the 2026 inflation forecast from 12 percent to 16 percent is linked to rising food prices, underlying inflation trends, and import price pressures denominated in Turkish lira. The Bank underscored the necessity of sustaining domestic demand at disinflationary levels through monetary policy measures, coordinating fiscal policy to bolster disinflation, and fostering a real appreciation of the lira alongside improved inflation expectations. Governor Karahan stressed the importance of maintaining a tight monetary policy stance and effective liquidity management to achieve the targeted reduction in inflation.
Additionally, official statistics from the Turkish Statistical Institute (TurkStat)
indicated
that inflation eased to 33.52 percent in July 2025, the lowest level since November 2021, and continued a trend of gradual disinflation following the sharp peak in mid-2024. The decline in inflation was widespread across categories such as food and non-alcoholic beverages, housing, health, communications, and services including hotels and restaurants. However, certain sectors like transport and clothing experienced slight increases in inflationary pressures. This situation has prompted the central bank to cautiously resume its monetary easing cycle, beginning with the 300 basis points rate cut in July, clearly signaling that any further rate adjustments will hinge on future inflation outcomes and economic conditions.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The National
an hour ago
- The National
Dubai's economy grew 4% in first quarter on diversification boost
Dubai's economy grew by 4 per cent annually in the first quarter of 2025, backed by expansion across several key sectors. The emirate's gross domestic product rose to Dh119.7 billion ($32.6 billion) in the three months that ended in March, Dubai Media Office said on Thursday. The growth was driven by 'strong performances' in key sectors, with human health and social work posting the highest year-on-year growth rate at 26 per cent to hit Dh1.9 billion, it said. In terms of value, the wholesale and retail trade sector was the biggest at Dh27.5 billion, up 4.5 per cent year-on-year and contributing nearly a quarter to Dubai's economy in the first three months. Activity in real estate, one of Dubai's most important sectors, rose 7.8 per cent to about Dh9 billion. The volume and value of real estate transactions in Dubai rose sharply in the first half of the year amid the entry of more than 59,000 new investors into the booming market, Dubai Media Office said last month, quoting Dubai Land Department data. The number of transactions reached 125,538, up nearly 26 per cent from 99,947 during the first six months of last year. The value of these transactions rose about 25 per cent to about Dh431 billion, 'highlighting the strong growth momentum in the market', the report said. In the first quarter, financial and insurance, another key industry in Dubai, grew 5.9 per cent to Dh16 billion. Manufacturing grew 3.3 per cent to Dh8.7 billion. Accommodation and food services posted a 3.4 per cent increase to reach Dh4.9 billion, the report found. Dubai received 9.88 million international visitors in the first six months of 2025, Crown Prince Sheikh Hamdan bin Mohammed said this month. Dubai's Department of Economy and Tourism said the latest figure represents a 6 per cent year-on-year increase. The data highlights Dubai's continuing growth as a global tourism hub, after the city welcomed a record 18.72 million international visitors last year. Meanwhile, transport and storage added 2 per cent to Dubai's GDP in the second quarter, at Dh15.7 billion. Information and telecoms rose 3.2 per cent to Dh5.3 billion. Overall, the trade, real estate, financial services, transport and industry sectors collectively contributed about 78 per cent of Dubai's total growth, the media office said. 'At a time when businesses, investors and entrepreneurs are seeking stability and certainty, Dubai's sustained and diversified economic growth continues to underscore its global appeal,' said Hadi Badri, chief executive of Dubai Economic Development Corporation. The emirate remains focused on boosting domestic and international partnerships through strategic initiatives to unlock "new opportunities, enabling innovation, and turning ideas and plans into scaleable, commercial successes", he added. Dubai's economy has been expanding on the back of several government initiatives aimed at encouraging entrepreneurship and attracting international investments The emirate is currently working towards its Dubai Economic Agenda, or D33, which aims to double the size of its economy to Dh32 trillion over the next decade and establish the emirate among the top three global cities. The wider UAE has also undergone robust growth in its economy, which expanded by 4 per cent in 2024 to hit Dh1.776 trillion, driven by its non-oil sector as the country continues to diversify, official data showed in June. The World Bank in June upgraded its economic growth forecast for the UAE to 4.6 per cent this year, up from its 4 per cent projection in January. Emirates NBD, Dubai's biggest bank by assets, expects the emirate's economy accelerate to 3.7 per cent this year on the back of substantial project spending from both the private and public sectors. foreign direct investments. The Emirates, which received Dh167 billion in FDI last year, aims to increase that figure to Dh1.3 trillion by 2031.
Zawya
an hour ago
- Zawya
Gold subdued as hot US data lifts dollar, yields; cools hopes for jumbo Fed cut
Gold prices were subdued on Thursday as hotter-than-expected U.S. inflation data and a drop in jobless claims lifted the dollar and Treasury yields, trimming the odds of a supersized September rate cut. Spot gold fell 0.1% to $3,352.65 per ounce as of 9:15 a.m. ET (1315 GMT). U.S. gold futures for December delivery were down 0.2% to $3,400.60. The dollar index gained 0.2% from an over two-week low, making bullion less attractive for non-U.S. buyers, while benchmark 10-year yields edged up from a one-week low. Stronger U.S. wholesale price data tempered bets on a larger, half-point cut next month. Traders are now leaning toward a quarter-point move with another in October, reinforcing comments from Fed's Mary Daly that such a large cut is not needed. The Labor Department reported the producer price index rose 3.3% year-on-year in July, beating forecasts of 2.5%. Weekly jobless claims also came in lower than expected, at 224,000 versus 228,000 forecast. "Gold trades lower as the stronger than expected U.S. PPI print may lower rate cut hopes (expectations) as they feed into a higher Core PCE inflation print for July as well, likely keeping the Federal Reserve cautious on rate cuts," said Saxo Bank's head of commodity strategy, Ole Hansen. "Overall, the print does not alter our bullish view on gold as the Fed eventually will have to choose between fighting inflation or supporting the economy." Gold, a traditional refuge in times of economic or geopolitical strain, tends to benefit from low interest rates. Investors also kept an eye on geopolitical risks. U.S. President Donald Trump warned of "severe consequences" if Russian President Vladimir Putin rejects a Ukraine peace proposal at their upcoming summit, hinting at a subsequent meeting with Ukraine's leader. Elsewhere, spot silver lost 1% to $38.11 per ounce, platinum gained 1% to $1,352.60 and palladium rose 1.7% to $1,140.81. (Reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Leroy Leo)
Zawya
an hour ago
- Zawya
EGA to deliver first-ever CelestiAL-R billets to Japanese manufacturer
Emirates Global Aluminium, the largest industrial company in the United Arab Emirates and the world's biggest 'premium aluminium' producer, today announced an agreement to supply of CelestiAL-R billets to Sankyo Tateyama, the leading Japanese manufacture of aluminium components for architectural and industrial applications through our strategic partner ITOCHU Corporation. CelestiAL-R is the world's first combination of aluminium produced with solar power and scrap metal, significantly reducing greenhouse gas emissions. The introduction of CelestiAL-R billets allows EGA to meet further demand for low-carbon aluminium in extrusion and forging applications. Previously, EGA only produced CelestiAL-R foundry alloys which are ideal for re-melting applications. Demand for low-carbon aluminium is rising in Japan as industries seek to reduce their carbon footprint in line with national net-zero targets. EGA and ITOCHU supplies aluminium ingot and billet to Sankyo Tateyama, and in 2024 started to supply CelestiAL, which is solar power generated aluminium. EGA is able to produce CelestiAL-R to customer specifications due to the high quality of EGA's primary aluminium, the rigorous selection of scrap metal, and the flexibility of EGA's Casthouses. Abdulnasser Bin Kalban, Chief Executive Officer of Emirates Global Aluminium, said: 'Our first production of CelestiAL-R billets is a step forward in expanding the portfolio of our most sustainable aluminium products. At EGA, we focus on innovation and flexibility in delivering the highest quality, low-carbon aluminium to meet specific customer needs. We value our long-standing partnership with Sankyo Tateyama and thank them for their continued trust in EGA.' Shozo Hirano, President of Sankyo Tateyama, said: 'Reducing Scope 3 CO2 emissions from aluminium raw material is a major challenge in achieving carbon neutral. By using CelestiAL-R in addition to CelestiAL, which is supplied by our long time partners EGA and ITOCHU Corporation, we aim to contribute to sustainable and affluent life.' Scrap for CelestiAL-R is a mix of post-consumer and pre-consumer industrial scrap. All scrap arriving at EGA is tested against 40 different chemical and other property requirements.
