Inflation in Türkiye capped a fourth straight month of declines in December, official data showed on Monday, with both annual and monthly figures coming in below expectations and clearing the way for interest rate cuts to continue.
Consumer price inflation slowed to 30.89% last month from 31.07% in November, the Turkish Statistical Institute (TurkStat) said. This was the lowest rate since November 2021, when prices had risen 19.82%.
Treasury and Finance Minister Mehmet Şimşek said disinflation "spread across the board," noting that end-2025 inflation decreased by 13.5 percentage points compared to the 44.4% posted a year earlier.
On a monthly basis, consumer prices rose 0.89% in December, the TurkStat said, following a 0.87% increase in the previous month.
Surveys had forecast annual inflation of about 31% and monthly inflation of 0.98%. The Central Bank of the Republic of Türkiye's (CBRT) end-2025 interim inflation target stood at 24%, with a forecast range of 31%-33%.
The bank cited a continued favorable course in food prices when it delivered a larger-than-expected 150 basis-point interest rate cut last month.
Heavily weighted food and non-alcoholic drinks prices rose 28.31% annually last month, with price rises led by education at 66.27% and housing at 49.45%, the TurkStat said.
Inflation based on transportation moderated to 28.44% from 29.23%. Annual inflation stood at 17.7% in core goods and dropped by 21.7 percentage points in services to 44%, Şimşek wrote on the social media platform X.
Vice President Cevdet Yılmaz said the decline in agricultural production due to frost and drought had caused "temporary" increases in food prices in 2025 and was effective in the year-end inflation coming in above expectations.
"Despite limited and temporary shocks, thanks to the balancing in demand, normalization in pricing behavior and improvement in expectations, the decline in inflation has reached 44.6 points compared to May 2024," Yılmaz wrote on X.
Significant decreases expected in the rate of increases for items with strong backward-looking pricing tendencies, such as education and rent, "will carry the improvement in annual inflation to a more advanced level," he added.
In total, the central bank shaved 950 basis points off its one-week repo rate in 2025, bringing it down from 47.5% to 38%. The first of eight monetary policy meetings planned for 2026 is scheduled for Jan. 22.
While the bank has emphasized that future decisions will remain data-driven and assessed on a meeting-by-meeting basis, it's still widely expected to continue with its easing cycle.
What appears to be encouraging for authorities is that inflation expectations, although still high, have been declining among market participants, businesses and households.
Government officials have said they expect inflation to fall below the 20% levels this year. Yılmaz said they also aim for the stickiness in pricing behavior to be permanently broken, and for inflation to recede back to single-digit levels starting from 2027.
The CBRT expects inflation to fall to its 16% interim target by the end of 2026, with a projected range of 13%-19%.
Şimşek on Monday said supportive global financial conditions and moderate commodity prices, tight monetary policy, strengthening fiscal discipline, administrated price increases aligned with inflation targets, improvement in expectations and supply-side policies would contribute to disinflation this year.
Monday's data also showed the domestic producer price index rose 0.75% month-over-month in December for an annual increase of 27.67%.
Prices of mining and quarrying climbed 33.92%, and manufacturing reported a 27.10% rise.
Producer prices of electricity, gas, steam and air conditioning grew 28.69% and surged 57.15% for water supply.
