The Central Bank raised its year-end inflation forecast for 2025 from 21% to 24%. Inflation forecasts were set at 12% for 2026 and 8% for 2027. TCMB President Karahan stated that this revision does not signal any relaxation. Regarding the interest rate cut cycle, Karahan said, “We are not on autopilot, we are data-focused.”

Central Bank (TCMB) President Fatih Karahan conducted the presentation of the first inflation report of the year at the Istanbul Finance Center. TCMB raised its 2025 inflation forecast from 21% to 24%. The inflation forecast for 2026 was set at 12% and 8% for 2027.

Karahan emphasized that this revision does not indicate any relaxation signal, stating, “We will maintain our tight stance on the monetary policy until a permanent decrease in inflation and price stability are achieved.”

Regarding future interest rate cuts, Karahan said, “We are not on autopilot, we are data-focused. We believe that we have a certain range, and we will act prudently.”

“DEFLATION PROCESS CONTINUES”

Highlights from Karahan’s statements:

Our deflation process is ongoing, and macroeconomic indicators are progressing in line with this process.

Recently, we have observed a significant increase in uncertainties about global trade policies.

Market pricing indicates that interest rates will be lowered more slowly in 2025 in both developed and developing countries.

“STABLE TREND EXPECTED IN DOMESTIC DEMAND”

Current production indicators for the fourth quarter point towards a moderate recovery in economic activity.

The data on the demand for goods and services, as a whole, indicate that demand conditions are supportive of the decrease in inflation. I would like to underline that due to our tight monetary policy, a balanced trend in domestic demand will continue. The output gap will remain negative in the coming period, playing a significant role in the deflation process.

“INCREASE EXPECTED IN CURRENT ACCOUNT DEFICIT”

We anticipate an increase in the current account deficit in the upcoming period. However, the impact of this increase will be limited due to our tight monetary stance. We predict that the current account deficit as a percentage of national income will continue to be below its historical average in 2025.

The main downward trend in inflation has continued over the last quarter. However, in January, there was a rise in pricing in time-dependent categories. On the other hand, items influenced by the situation have shown lower price increase rates compared to the past year.

IMPACT OF HEALTHCARE PARTICIPATION FEE ON INFLATION

Official healthcare participation fees saw an increase for the first time since 2017. The significant increase had a 0.6-point impact on consumer inflation in January. Additionally, the effects of this regulation on February’s inflation will also be observed.

REN…