TEPAV: The Policy Rate Should Remain Stable for the Inflation Target

TEPAV Draws Attention to 2026 Inflation Goals

TEPAV Monetary Policy Working Group has published the Monetary Policy Assessment Note for January 2026. This assessment note provides significant evaluations and recommendations about monetary policy through the lens of Turkey's inflation outlook, expectations, and macroeconomic risks.

Monthly Inflation Data and G20 Ranking

The report emphasizes that the monthly inflation rate of 0.89% recorded in December 2025 was the second highest among G20 countries, following only Argentina. Thus, Turkey completed the year 2025 as the second country with the highest inflation within the G20.

Discrepancy Between Inflation Target and Market Expectations

It was noted that the seasonally adjusted average monthly inflation for the period of July-October 2025 was 2.47%, while it decreased to 1.58% in the November-December period. However, it was stated that this level remained above the upper limit of the 2026 inflation target. The year-end inflation target for 2026 is set at 16%, whereas market expectations are 23.2% and the real sector's expectations are 34.8%. The discrepancy in these expectations complicates the sustainability of the fight against inflation.

Macroeconomic Stability and Risk Premium

The Working Group drew attention to the importance of recent developments for achieving macroeconomic stability. It was expressed that to ensure the success of stability programs, the risk premium needs to be permanently reduced, and that internal and external uncertainties complicate this process.

Two Scenarios for Policy Rate

TEPAV evaluated policy recommendations based on two main scenarios. If the year-end inflation target of 2026 is maintained at 16%, it is suggested that the policy rate should remain unchanged. However, if the inflation target is updated to the range of 20-25%, it was indicated that a reduction of 150 basis points might be possible in the policy rate.

Need for Comprehensive Reforms

In the conclusion section, it was emphasized that to permanently reduce inflation, monetary policy needs to be supported by fiscal policy and structural reforms. It was stated that a comprehensive development program that strengthens the rule of law and reinforces independence should be implemented as soon as possible.