TCMB Raises 2026 Inflation Forecast to 28% Amid Slowing Credit Growth

The Central Bank of the Republic of Turkey lifted its 2026 year‑end inflation forecast from 26% to 28%, signalling a fresh wave of policy pressure.

Inflation Trajectories That Won’t Fade

■2026 year‑end headline inflation target now 28%; interim target remains at 24%.

■Food inflation for 2026 raised to 28.5%, while 2027 food inflation stays at 19%.

■Higher outlook for diesel, natural gas and non‑energy commodity prices drove the upward revision.

■Average oil price assumption trimmed to $87.8 per barrel (previously $89.4).

Cooling Signals in the Credit Market

■The CB’s governor noted a clear slowdown in credit growth as of Q2‑2026, affecting all credit categories.

■Slower card‑spending confirms demand conditions have moved into a deflationary zone.

■“One‑week repo reversal” is on the agenda; the bank will act once conditions are favourable.

Policy Stance Outcomes

■The bank reiterated its “deflation‑focused tight stance” and warned that inflation remains above 30% in a volatile band.

■Improvements in risk premia and FX volatility reinforce the impact of a tight monetary policy.

■A contingency plan for further tightening was disclosed should inflation deteriorate persistently.

Risk‑Reward Landscape

■Global developments: The Fed’s retreat from verbal guidance has heightened uncertainty.

■War‑related risks: The worst‑case scenario appears to be receding; rental markets show signs of improvement.

■Food sector: Strong harvest expectations could slightly temper year‑end food inflation.

■FX market: Household appetite for the Turkish lira is rising, potentially influencing policy direction.

Kerem Tufan – Director of Commercial Credit & Central Bank Policies: The upward revision of inflation forecasts, coupled with a cooling credit expansion, will reshape risk perception across the banking sector. The slowdown in credit demand—particularly among SMEs—may tighten collateral standards, amplifying liquidity pressures while banks strive to preserve balance‑sheet quality. The central bank’s tight‑stance messaging aims to anchor market expectations, yet external shocks (energy prices, geopolitical tensions) could spike volatility and raise the likelihood of an additional policy rate hike. Monitoring credit‑portfolio performance and bolstering collateral quality will be paramount in the coming quarter.