Turkey recorded a 2.96% increase in consumer prices in February compared with the previous month, while the annual inflation rate elevated to 31.53%, official data released on March 3 show. The figures arrived broadly in line with market expectations and set the stage for a consequential central bank policy decision next week.
Monthly inflation in February was driven in large part by a 6.89% jump in food and drinks prices, the Turkish Statistical Institute reported, marking a second consecutive month of notable pressure in that category. The persistence of elevated food inflation has raised questions about the continuity of the disinflation trend that began in 2024 but has recently slowed.
The domestic producer price index (PPI) also moved higher in February, climbing 2.43% from January and producing a 12-month increase of 27.56%, according to the same release. Together, the consumer and producer price readings underline ongoing cost pressures across supply chains and final demand.
Beyond the headline figures, markets have been unsettled by geopolitical tensions in the region. Financial turmoil sparked by the conflict between the U.S. - Israel and neighbouring Iran prompted the central bank to take emergency steps, including roughly $8 billion in foreign exchange sales on Monday. Those interventions coincided with a roughly 300 basis-point uptick in the overnight rate to about 40% on that day.
Analysts say the combination of elevated inflation readings and recent market moves increases the likelihood that the central bank will formally pause the easing cycle it began in late 2024. In January the monetary policy committee had trimmed the bank’s main policy interest repo rate by 100 basis points to 37%.
January's data had shown a sharper monthly consumer price increase of 4.84% and an annual rate of 30.65%, underscoring how month-to-month variability has complicated the assessment of whether the disinflation path remains intact. In response to the recent rise in food prices, Finance Minister Mehmet Simsek said he expected those increases would be offset in the coming period depending on weather conditions, while acknowledging energy costs have been pushed higher by the Iran conflict.
"We are working to limit the inflationary impact of rising oil prices due to geopolitical developments," he said, adding that all policy tools are being used in coordination to sustain the disinflation process.
Market expectations for central bank moves have shifted in recent days. A Reuters poll had forecast monthly inflation at 3% and the annual rate at 31.55% for February. Meanwhile, JPMorgan - which like most analysts had earlier expected another policy rate cut at the central bank’s March 12 meeting - said on Monday it now anticipates the bank will hold rates. JPMorgan also adjusted its year‑end inflation forecast to 25% from 24%.
The central bank itself has nudged its year‑end inflation forecast range up by two percentage points to 15-21%, while keeping an interim target of 16% unchanged. Officials have repeatedly signalled they remain prepared to tighten policy if conditions demand it, even as recent communications had kept rate‑cut expectations alive.
With the policy meeting scheduled for March 12, policymakers must weigh the mixed signals from the inflation data, the recent spike in short-term rates linked to FX intervention, and the potential for further price shocks resulting from geopolitical developments.