TEPAV Urges Turkish Central Bank to Explain Missed Inflation Targets

A new report from TEPAV's Monetary Policy Working Group is calling on the Central Bank of Turkey to publicly explain its failure to meet inflation targets, invoking Article 42 of the Central Bank Law. This article mandates that the bank must disclose the reasons and remedial measures if inflation targets are not met within the announced timeframe. The assessment indicates that inflation is projected to significantly exceed the updated year-end target for 2026 under the current economic conditions.

The report highlights that annual consumer inflation stood at 32.6% as of May 2026, having fluctuated within a narrow band of 30.9% to 33.5% for the past 11 months. This persistent inflation, TEPAV argues, has led to sticky price behaviors and a lack of anchored inflation expectations. Furthermore, ongoing geopolitical conflicts in Western Asia contribute to uncertainties in energy, commodity, and international transportation costs, exacerbating the challenges in combating inflation and increasing public dissatisfaction with the economic program.

TEPAV identifies significant shortcomings in the current economic program and unresolved questions about its sustainability as the core issues. The report emphasizes that establishing a fair and efficient judicial system, strengthening the rule of law, and enhancing respect for democratic values are crucial for economic stability. It also stresses the need for a new development strategy that garnards broad societal support.

To bolster the fight against inflation, TEPAV advocates for a comprehensive fiscal reform. This includes measures to combat the shadow economy, restructure public expenditures, and reduce the budget deficit. The Monetary Policy Working Group reiterated its call for a public statement under Article 42 and recommended maintaining the current monetary policy framework, suggesting the overnight lending rate remain at 40%, the repo rate at 37%, and the overnight borrowing rate at 35.5%.