Citi Turkey Report: CBRT Interest Rate Decision and Inflation Expectations

Following Turkey's August inflation data coming in below expectations, global financial institution Citi projected that the Central Bank of the Republic of Turkey will not make any changes in its September interest rate decision.

August Inflation Data

The Consumer Price Index announced by TURKSTAT realized at an annual rate of 31.51 percent in August. Citi's inflation expectation for Turkey for this period was at the level of 31.70 percent.

The mild trend in clothing inflation and the calm picture in food prices were effective in keeping the announced inflation data below the bank's expectation.

Inflation and Expectations

Bank analysts noted that 12-month-ahead inflation expectations have risen by 159 basis points to 23.69 percent since the trough in February.

The report stated that core inflation indicators remained high at around 30 percent annually and services inflation at around 40 percent.

CBRT September Interest Rate Expectation

Citi projected that the Central Bank of the Republic of Turkey will not make any interest rate changes at its Monetary Policy Committee meeting in September.

Despite weakening domestic demand, the limited disinflationary effect indicated that the shocks were supply-driven and structural in nature.

Year-End Projections

Evaluating that the burden of disinflation is largely left on the exchange rate, the bank estimates that the policy rate will finish 2026 at the level of 35 percent.

Inflation is expected to close the year close to its current levels, slightly above the 30.9 percent level at the end of 2025.