Turkey’s inflation rate YoY for December 2025 registered at 31.07%, marking a notable decline from November’s 32.87% and continuing a downward trend from the 42.12% peak in February 2025. This figure, sourced from the Sigmanomics database, came in below the consensus estimate of 31.60%, signaling a modest easing of price pressures.

Drivers this month

• Energy prices contributed 0.45 percentage points (pp), down from 0.70 pp last month.
• Food inflation eased to 1.20 pp from 1.50 pp in November.
• Core inflation components, excluding volatile items, declined slightly to 27.30% YoY.

Policy pulse

The inflation rate remains well above the central bank’s 5% target, but the downward trajectory supports the recent monetary tightening stance. The Central Bank of the Republic of Turkey (CBRT) has kept policy rates elevated at 25%, aiming to anchor inflation expectations.

Market lens

Immediate reaction: The Turkish lira (TRY) appreciated 0.30% against the USD in the first hour post-release, reflecting relief at the lower-than-expected print. Short-term government bond yields declined by 10 basis points, signaling improved sentiment.

Examining Turkey’s broader macroeconomic indicators reveals a complex backdrop. GDP growth slowed to an estimated 2.50% in Q3 2025, down from 3.10% in Q2, reflecting tighter financial conditions. Unemployment remains elevated at 11.80%, pressuring household incomes and consumption.

Monetary Policy & Financial Conditions

The CBRT’s policy rate has remained at 25% since mid-2025, a level designed to curb inflation without stifling growth entirely. Credit growth has decelerated to 8% YoY from 12% earlier in the year, indicating tighter lending conditions. Inflation expectations for 2026 have moderated to 18%, down from 25% six months ago.

Fiscal Policy & Government Budget

Turkey’s fiscal deficit narrowed to 3.20% of GDP in Q3 2025, aided by improved tax collection and restrained public spending. However, elevated debt servicing costs—exacerbated by TRY depreciation earlier in the year—limit fiscal space. The government’s commitment to fiscal discipline remains a key factor in inflation dynamics.

External Shocks & Geopolitical Risks

Persistent geopolitical tensions in the Eastern Mediterranean and regional trade disruptions continue to pressure import prices. Volatility in global energy markets also feeds into domestic inflation, though recent stabilization in oil prices has helped ease cost-push pressures.

Market lens

Immediate reaction: Turkish government bond yields (10-year) fell by 10 basis points, reflecting improved confidence. The TRY/USD exchange rate strengthened slightly, reversing recent depreciation trends. Inflation-linked bonds showed modest gains, indicating tempered inflation risk premiums.

Looking ahead, Turkey’s inflation trajectory depends on several key factors. The CBRT’s monetary stance, fiscal discipline, external price shocks, and structural reforms will shape the path.

Bullish scenario (20% probability)

• Continued monetary tightening and fiscal consolidation drive inflation below 20% by mid-2026.
• Global energy prices stabilize or decline, easing cost-push inflation.
• TRY stabilizes, reducing imported inflation pressures.

Base scenario (60% probability)

• Inflation gradually declines to 25% by end-2026, reflecting slow but steady policy impact.
• Core inflation remains sticky, limiting faster disinflation.
• Geopolitical risks persist but do not escalate materially.

Bearish scenario (20% probability)

• External shocks or renewed TRY depreciation push inflation above 35% again.
• Monetary policy loosens prematurely, fueling inflation expectations.
• Fiscal slippage increases deficit and debt pressures.

Overall, the inflation outlook remains challenging. Structural inflation drivers such as wage-price dynamics and supply bottlenecks require long-term reforms. However, the current disinflation trend offers a cautiously optimistic base case.

Turkey’s December 2025 inflation print of 31.07% YoY confirms a gradual easing from the early-year peak but underscores persistent macroeconomic challenges. Monetary and fiscal policies have helped temper inflation, yet structural factors and external risks keep the outlook uncertain.

Financial markets responded positively but remain wary of volatility. The CBRT’s commitment to high policy rates is crucial to anchoring expectations. Meanwhile, fiscal prudence and geopolitical stability will be key to sustaining progress.

In sum, Turkey’s inflation path is a slow descent rather than a rapid fall. Policymakers must balance growth and price stability carefully to avoid setbacks.

Key Markets Likely to React to Inflation Rate YoY

Turkey’s inflation rate is a critical barometer for several asset classes. The Turkish lira (TRYUSD) often moves inversely to inflation surprises, while government bonds (XU100) reflect shifts in monetary policy expectations. Energy-linked stocks (TUPRS) respond to cost pressures, and crypto assets like BTCUSD may react to broader risk sentiment shifts. The USDTRY forex pair is also sensitive to inflation data, influencing carry trade flows.

• TRYUSD – Directly impacted by inflation-driven monetary policy and currency stability.
• XU100 – Turkish equity index sensitive to inflation and interest rate changes.
• TUPRS – Energy sector stock affected by inflation and commodity price shifts.
• BTCUSD – Crypto asset reacting to inflation-driven risk appetite changes.
• USDTRY – Forex pair reflecting inflation and monetary policy expectations.

FAQs

What is the current Inflation Rate YoY for Turkey?

The latest inflation rate YoY for Turkey is 31.07% as of December 2025, down from 32.87% in November.

How does Turkey’s inflation affect its monetary policy?

High inflation has led the CBRT to maintain a 25% policy rate to anchor expectations and slow price growth.

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

Key risks include external shocks, geopolitical tensions, currency volatility, and potential fiscal slippage.

Final Takeaway: Turkey’s inflation is easing but remains elevated, requiring sustained policy discipline and structural reforms to achieve lasting price stability.

Updated 12/3/25

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.