Turkey's central bank lifts inflation outlook for 2027 and 2028

what happened

Turkey's central bank, as reported by Reuters, now expects inflation to end 2027 at 21%, up from an earlier 15%, and to finish 2028 at 13.5% against a previous 9%. Presenting its quarterly inflation report in Istanbul, Governor Fatih Karahan also raised the year-end 2026 forecast to 29.5% from 28%, while keeping the interim target at 24%. The 2027 and 2028 targets match the new forecasts.

According to Karahan, policy will remain tight to bring disinflation about, since supply-side shocks are slowing the decline in prices. After the presentation the lira traded at 50.2575 per dollar, versus 50.2325 at Wednesday's close. Last month the bank cut its policy rate by 100 basis points to 36%, as expected, ending five meetings without a change while it watched the inflation effects of the Iran war. In October, consumer prices rose 2.58% month on month, above forecasts, and annual inflation reached 29.77%.

why it matters

For investors, the revision means disinflation will take longer than previously assumed, which adds pressure on the lira and on local-currency Turkish bonds and limits room for further rate cuts.

market impact

Lira and Turkish bonds: a higher inflation outlook adds pressure on the currency and local debt

• ▼Turkish lira pressure down — higher inflation erodes the currency's real returns
• ▼Turkish government bonds pressure down — a longer disinflation path raises the yields investors demand

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