Turkish Inflation Slows to 31.75%
Türkiye’s annual inflation eased to 31.75% in July 2026 from 32.11% in June, reaching its lowest level since March. Current price momentum was less encouraging: consumer prices rose by 1.78% during the month after a 0.99% increase in June, while core inflation edged higher. Rising fuel, electricity and food costs complicate the central bank’s task as it keeps its policy rate at 37%.
Annual inflation declines for a second month
Consumer prices were 31.75% higher than in July 2025. Annual inflation had stood at 32.11% in June and 32.61% in May. The latest reading was the lowest since March, when inflation was 30.87%.
The result was marginally better than market expectations of approximately 31.8% annual inflation and a monthly increase of 1.82–1.83%.
Prices have increased by 19.86% since December 2025, while inflation calculated through 12-month averages stood at 31.9%.
Monthly inflation accelerates to 1.78%
Consumer prices rose by 1.78% from June, compared with 0.99% in the previous month. It was the highest monthly reading since April.
Annual inflation can fall while monthly inflation accelerates because the two measures compare different periods. Prices rose by 2.06% in July 2025 and by 1.78% in July 2026. Replacing the larger prior-year figure with the smaller latest increase reduced the annual rate.
The improvement therefore partly reflects a favourable comparison base rather than a decisive weakening in current price growth.
Housing and food outpace the headline index
Housing, water, electricity, gas and other fuels increased by 40.32% from a year earlier. Food and non-alcoholic beverages rose by 37.53%, while transportation costs increased by 30.83%.
Food contributed 8.94 percentage points to annual inflation, transportation 5.22 points and housing 5.21 points.
During July alone, transportation prices increased by 2.59%, housing by 2.25% and food by 1.61%. Prices rose in 117 of the 174 subclasses monitored by TurkStat, declined in 50 and were unchanged in seven.
Core inflation edges higher
The commonly reported core inflation rate increased to 29.91% from 29.84% in June. The core consumer price index rose to 130.97 points from 128.65.
The change was small but does not confirm a broad decline in underlying price pressure. Headline inflation benefited from base effects and slower annual growth in some large categories, while the core measure remained almost unchanged.
Vice President Cevdet Yılmaz separately said inflation in core goods had declined to 16.82%. That is a narrower measure and should not be confused with the broader core CPI.
Energy remains the main risk
Government officials attributed the monthly acceleration partly to higher oil prices, adjustments in administered prices and increases in fresh fruit and vegetable costs. Domestic energy prices rose after declining in May and June, led by fuel and electricity.
Türkiye relies heavily on imported oil and natural gas. Higher global prices raise costs for fuel, electricity, transportation and manufacturing, while lira depreciation makes dollar-denominated imports more expensive.
Before the July data, the central bank had already said energy prices were rising again and that geopolitical uncertainty could affect inflation through costs, economic activity and expectations.
The gradual withdrawal of the sliding-scale fuel-tax mechanism creates an additional risk. The system had allowed reductions in special consumption tax to offset part of the increase in international oil prices.
Food inflation rises again
Annual food inflation accelerated to 37.53% from 35.45% in June, leaving food as the largest individual contributor to headline inflation.
Food prices have an outsized impact on household perceptions because they are paid frequently and account for a larger share of spending among lower-income families.
July’s outcome was mixed. Lower prices for some unprocessed foods helped limit the headline reading, but fresh produce, administered prices and non-food categories exerted upward pressure.
The central bank keeps its rate at 37%
The Monetary Policy Committee maintained the one-week repo rate at 37% on July 23. The overnight lending rate remained at 40%, while the overnight borrowing rate stayed at 35.5%.
The bank said the underlying inflation trend had eased slightly in June but was expected to rise temporarily in July. Domestic demand continued to weaken, which should gradually limit businesses’ pricing power.
Officials have not committed to a cut at the next meeting. Decisions will be made meeting by meeting, and policy may be tightened if the inflation outlook deteriorates significantly and persistently.
The next rate decision is scheduled for September 10. A new Inflation Report will be published on August 13.
The policy rate does not show the full stance
The policy rate is 5.25 percentage points above the latest annual inflation figure. That simple difference is positive, but it is not a complete measure of monetary tightness because policymakers focus on expected inflation and its underlying trend.
The central bank has also restricted one-week repo funding and used more expensive liquidity instruments during periods of external stress. Actual financing conditions may therefore be tighter than the 37% headline rate alone suggests.
Higher monthly inflation, food-price pressure and energy uncertainty limit the room for rapid easing. Premature cuts could increase foreign-currency demand, weaken the lira and strengthen the pass-through from import costs.
The forecast and interim target are different
The central bank’s baseline point forecast is for inflation of 26% at the end of 2026, 15% at the end of 2027 and 9% at the end of 2028. Its medium-term target remains 5%.
The bank separately revised its interim targets to 24% for 2026, 15% for 2027 and 9% for 2028. The forecast describes the expected path under the bank’s assumptions, while the interim target guides the monetary-policy stance.
The two numbers should therefore not be presented as competing versions of the same forecast.
Reaching 26% requires a sharp slowdown
Consumer prices were 19.86% higher than in December by the end of July. For annual inflation to finish 2026 at 26%, cumulative price growth from August through December would need to be approximately 5.1%, equivalent to a geometric average of around 1% a month. The calculation uses the published year-to-date increase and the central bank’s point forecast.
July’s 1.78% monthly increase was well above that pace. The forecast remains mathematically possible if inflation slows substantially during the autumn, but renewed energy and administered-price increases leave less room for error.
Producer-price inflation eases slightly
Producer prices increased by 1.5% during July after a 1.8% rise in June. Annual producer inflation declined to approximately 27.83% from 28.09%, its lowest level in five months.
More than half of the monthly increase came from electricity and gas production, reinforcing the importance of energy costs for the consumer-price outlook.
Alternative estimates remain higher
The independent ENAG research group estimated monthly inflation at 3.07% and annual inflation at 50.49%.
The Istanbul Chamber of Commerce reported that retail prices in the city increased by 2.06% during July and by 35.2% over the year. Its index covers Istanbul and uses a separate basket, so it is not directly comparable with the national CPI.
Differences reflect separate samples, category weights and data-collection methods. TurkStat’s CPI remains the official national measure, although the continuing gap with alternative indicators fuels debate about living costs.
As International Investment experts report, the July figures confirm that annual disinflation is continuing but do not demonstrate a decisive improvement in current momentum. The headline rate declined to 31.75% partly because of base effects, while monthly inflation accelerated to 1.78% and the core rate edged higher. The central bank has grounds to maintain its current stance, but not to begin rapid easing. Energy remains the principal threat to the 26% year-end forecast: another increase in oil prices, lira depreciation or higher administered tariffs could quickly offset the favourable comparison base.