Turkey's inflation rates experience a substantial drop, reaching a nearly 4-year low in July.
In a significant development for Turkey's economy, the annual inflation rate has dropped to approximately 33.5% in July, marking the fourteenth consecutive month of slowing inflation and the lowest rate since November 2021[2][4]. This decline in inflation has been welcomed by economists and policymakers alike, with BBVA Research lowering its 2025 year-end inflation forecast from 31% to 30%[1].
The Central Bank of Turkey (CBRT) predicts inflation will continue declining to around 24% in 2025, with a forecast range between 19% and 29%, and expects inflation to further drop to about 12% in 2026[3]. This cautious easing in monetary policy reflects efforts to sustain disinflation without precipitating instability. The CBRT began cutting interest rates gradually from July 2025, with a 300 basis point cut already enacted and expectations for additional rate cuts continuing throughout the year[1][3][4].
The slowing inflation, combined with tightening monetary policy and weaker external demand, has contributed to a loss of momentum in economic activity. Real GDP growth is expected to decline from 3.2% in 2024 to about 2.7% in 2025, before potentially rebounding to 3.5% in 2026 as monetary conditions ease and external demand improves[3]. The government remains committed to its stabilization program, prioritizing lasting price stability.
However, there are ongoing debates about inflation measurement: while official statistics show easing inflation, some independent economists report much higher inflation rates (e.g., 65.15% annually per ENAG), indicating a divergence that fuels discussion on data reliability[4].
A closer look at the data reveals that producer prices of mining and quarrying climbed 28.3% in July, while water supply prices surged 55.74% for the same period[5]. The annual price growth in food and nonalcoholic beverages eased to 27.95%, and manufacturing reported a 24.02% rise in producer prices in July[5]. The central bank relaunched an easing cycle and suggested a temporary rise in monthly inflation in July due to month-specific factors[5].
Consumer price inflation also dropped to 33.52% in July, the lowest level in almost four years[6]. Service inflation fell below 50% for the first time in over three years, and the annual price growth in housing and utilities moderated to 62.01%[6]. Producer prices of electricity, gas, steam, and air conditioning grew 22.1% in July[5].
Cevdet Yılmaz, the Turkish vice president, stated that the decline in annual inflation continues to be "significant," and Türkiye aims to reduce inflation to the 20% range by the end of the year and permanently increase the well-being of the nation within price stability[7]. The government's commitment to this goal remains crucial as Turkey navigates this period of economic recovery and inflation stabilization.
In summary, Turkey's inflation rate has eased significantly, with the current rate standing at approximately 33.5% annual, and forecasts predicting a further drop to 12% in 2026. Monetary policy is being adjusted cautiously, and the economic impact is a slowing growth in 2025, with potential recovery in 2026 as conditions improve. However, concerns about data reliability persist, with official and independent inflation figures differing significantly. This easing inflation trend represents progress for Turkey's economy but remains fragile and closely tied to monetary policy and external factors.
References:
- BBVA Research lowers Turkey's inflation forecast
- Turkey's inflation drops to 33.5% in July
- CBRT lowers 2025 inflation forecast
- Turkey's inflation data raises questions about reliability
- Producer price inflation data for July 2025
- Consumer price inflation data for July 2025
- Yılmaz: Turkey aims to reduce inflation to the 20% range
- The decrease in inflation, as shown in the July rate of approximately 33.5%, could positively impact the health of the Turkish economy, potentially leading to improved living conditions for its citizens.
- With the Central Bank of Turkey's (CBRT) prospective reduction of inflation to around 24% in 2025 and 12% in 2026, investments in education might witness an increase as greater economic stability encourages long-term business and finance ventures.
- The lower projected inflation rates could foster a more stable economic environment, enabling businesses to operate more effectively and spurring economic growth – a change that could lead to potential improvements in the overall economy, benefiting various sectors including finance, business, and education.
