Education and rents were among the services sub-items posting the largest increase in the consumer price index (CPI) basket in 2025 in Türkiye, the Turkish central bank said in a new blog released on Thursday, exploring the reasons for the relatively high levels of inflation in these items.
"One important factor in education inflation was the backward indexation stemming from existing regulation," the Central Bank of the Republic of Türkiye (CBRT) said.
"Until recently, the regulation governing the pricing of private education was based on the 12-month average of consumer and domestic producer price increases. In practice, this amounted to using the past 24 months of inflation, thereby inducing substantial inertia. The amendment of Sept. 5, 2025, effectively reduced backward indexation by limiting the maximum price increase in the current year to year-end inflation in the previous year," it added.
"Another item that stands out in the high course of services inflation is rents," it also said.
The blog cited housing sector-specific factors, such as earthquakes, urban transformation, demographics, rent caps and the fact that contracts are mostly renewed once a year with backward indexation as a reason behind increasing the inertia of rent inflation.
The CBRT, as well as Turkish government officials, have often in the past highlighted the rigidity in the services sector despite the overall improvement in headline inflation in recent years.
"Moreover, the effect of services such as rents and education on inflation is not just confined to their direct impact arising from their consumption share. Pricing behavior in these sectors also has the potential to have secondary effects on inflation through the household budgets," the blog authored by CBRT economists suggested.
They said they expect that the latest regulatory change in education would contribute to the disinflation process by relatively weakening the backward indexation mechanism.
Another group which impacts inflation, meanwhile, was described as "locally provided services items with relatively limited competitiveness" such as hairdressers, household cleaning services, veterinary services, dry cleaning and footwear repair, as well as transport-related administered items.
Consumer inflation ended 2025 at 30.9%. While goods inflation was 25% over this period, services inflation remained high at 44%, the CBRT said.
