Turkey's inflation rate for December 2025 increased by 0.89% month-over-month (MoM), slightly up from November's 0.87% but below the 1.00% market estimate, according to the latest release from the Sigmanomics database. This marks a continuation of moderate inflationary momentum after a notable deceleration from the mid-2025 peak of 3.23% in October. The 12-month average inflation rate stands at approximately 1.92% MoM, underscoring a gradual easing from earlier in the year.

Drivers this month

• Shelter and housing costs contributed 0.25 percentage points (pp), reflecting ongoing rental price pressures.
• Food and beverage prices rose by 0.30 pp, driven by supply chain disruptions and seasonal demand.
• Energy inflation remained contained, adding 0.10 pp, supported by stable global oil prices.
• Core inflation components excluding volatile items edged up by 0.15 pp.

Policy pulse

The inflation rate remains above the Central Bank of the Republic of Turkey's (CBRT) official target of 5% annual inflation, translating into persistent monthly inflation pressures. The current MoM rate signals that disinflation is slow, complicating the CBRT's monetary policy stance. The bank has maintained a tight policy rate environment, with the one-week repo rate at 25%, aiming to anchor inflation expectations.

Market lens

Immediate reaction: The Turkish lira (TRY) depreciated by 0.4% against the US dollar within the first hour of the release, reflecting investor caution. Short-term government bond yields rose by 12 basis points, signaling increased inflation risk premiums. Equity markets showed muted responses, with the BIST 100 index down 0.3%.

Examining Turkey's core macroeconomic indicators provides context for the inflation dynamics observed in December 2025. The unemployment rate held steady at 11.5%, while industrial production grew by 1.2% MoM, indicating moderate economic activity. The current account deficit narrowed slightly to 1.8% of GDP, aided by improved export performance.

Monetary policy & financial conditions

The CBRT's restrictive monetary policy continues to weigh on credit growth, which slowed to 3.5% YoY in December. Real interest rates remain positive but modest, limiting the central bank's ability to aggressively combat inflation without stifling growth. Financial conditions have tightened, with increased volatility in the TRY and rising sovereign spreads.

Fiscal policy & government budget

Fiscal policy remains expansionary, with the government running a budget deficit of 3.2% of GDP in Q4 2025. Public spending on social programs and infrastructure projects has increased, partially offsetting monetary tightening. This fiscal stance may sustain demand-side inflation pressures in the near term.

External shocks & geopolitical risks

Turkey faces ongoing geopolitical tensions in the region, including border security concerns and energy supply uncertainties. These factors contribute to inflation volatility, particularly in food and energy prices. Global commodity price stability has helped contain energy inflation, but risks remain elevated.

What This Chart Tells Us

Market lens

Immediate reaction: Following the inflation release, the TRY/USD pair depreciated 0.4%, while 2-year government bond yields rose by 12 basis points. Inflation breakeven rates edged higher, reflecting market expectations of sustained inflation risks. Equity markets showed mild declines, with the BIST 100 index down 0.3%.

Looking ahead, Turkey's inflation trajectory faces several possible scenarios:

Bullish scenario (20% probability)

• Inflation falls below 0.5% MoM by Q2 2026 due to effective monetary policy and stable commodity prices.
• CBRT signals gradual easing, boosting investor confidence and stabilizing the TRY.
• Fiscal consolidation reduces demand-side pressures.

Base scenario (60% probability)

• Inflation moderates slowly, averaging 0.7–1.0% MoM through mid-2026.
• Monetary policy remains tight but cautious to avoid recession risks.
• External shocks and geopolitical risks persist, causing volatility.

Bearish scenario (20% probability)

• Inflation accelerates above 1.5% MoM due to renewed energy price shocks or currency depreciation.
• CBRT forced to hike rates further, risking economic slowdown.
• Fiscal expansion intensifies inflationary pressures.

Overall, the inflation outlook remains uncertain, with downside risks linked to geopolitical tensions and commodity markets. The Sigmanomics database highlights the importance of monitoring core inflation components and financial market signals closely.

Turkey's December 2025 inflation rate of 0.89% MoM reflects a modest uptick from November but remains below market expectations. The data underscores a slow disinflation process amid persistent structural and external challenges. Monetary policy tightening has begun to temper inflation, but fiscal expansion and geopolitical risks continue to complicate the outlook.

Financial markets reacted cautiously, with the Turkish lira weakening and bond yields rising. Policymakers face a delicate balancing act between curbing inflation and supporting growth. The coming months will be critical in determining whether inflation can be sustainably anchored or if renewed volatility will emerge.

Key Markets Likely to React to Inflation Rate MoM

The monthly inflation rate in Turkey is a key barometer for several asset classes. Currency markets, government bonds, and equities are particularly sensitive to inflation surprises and expectations. Below are five tradable symbols historically correlated with Turkey’s inflation dynamics, providing investors with actionable insights.

• USDTRY – The USD/TRY currency pair typically depreciates when inflation surprises on the upside, reflecting TRY weakness.
• BIST100 – Turkey’s main equity index often reacts negatively to higher inflation due to margin pressures and cost inflation.
• AKBNK.IS – Akbank shares are sensitive to inflation and interest rate changes, impacting banking sector profitability.
• BTCUSDT – Bitcoin is increasingly viewed as an inflation hedge, with price movements sometimes inversely correlated to inflation shocks in emerging markets.
• EURTRY – The Euro/Turkish lira pair also tracks inflation-driven currency volatility, often moving in tandem with USDTRY.

FAQs

What is the latest Inflation Rate MoM for Turkey?

The inflation rate for December 2025 rose by 0.89% MoM, slightly above November's 0.87% but below the 1.00% estimate.

How does this inflation reading compare historically?

It is lower than the October 2025 peak of 3.23% but remains above the 12-month average of 1.92%, indicating persistent inflation.

What are the main risks to Turkey’s inflation outlook?

Key risks include geopolitical tensions, commodity price shocks, and fiscal policy expansion, which could push inflation higher.

Takeaway: Turkey’s inflation is moderating but remains elevated, requiring vigilant monetary and fiscal coordination to avoid renewed inflationary spikes.

Updated 1/5/26