Türkiye's annual inflation cooled in June after two months of faster price growth linked to the fallout from the Iran war, according to data Friday that top officials said signaled the return of disinflation trend.
The annual rate eased to 32.1% from 32.6% in May, the Turkish Statistical Institute (TurkStat) said.
The decline in inflation had stalled in April, mainly due to the rise in energy prices caused by the war launched by the U.S. and Israel on Iran on Feb. 28.
On a monthly basis, consumer prices rose 0.99% in June, slowing from 1.7% in May, the data showed.
The Iran war sent energy prices up sharply due to the closure of the Strait of Hormuz, renewing inflationary pressures worldwide and fueling expectations of tighter monetary policy across many countries.
Fertilizer costs had also gone up significantly, raising concerns about a major food supply crisis.
The pressures have eased somewhat after the U.S. and Iran announced an interim agreement two weeks ago, but there are no signs yet that they have made headway toward a lasting peace.
Though traffic through the Strait of Hormuz, which handled one-fifth of global oil and liquid natural gas trade before the war, has partially resumed, the status of the strategic waterway remains unclear and the two countries exchanged strikes last weekend.
"The disinflation process, which had been interrupted by rising global energy prices due to supply shocks, has resumed," Turkish Treasury and Finance Minister Mehmet Şimşek said following the data release.
Vice President Cevdet Yılmaz also said the downward trend is back and is expected to continue.
On an annual basis, education prices rose 46.1% in June, while housing costs, including energy bills, increased 45.1%, down from 45.59% in May.
Food prices were up 35.4%, health care costs rose 33.6%, while transportation prices increased 31.15%.
On a monthly basis, housing costs rose 2.30%, while food prices increased 0.17%. Transportation prices edged down 0.05%.
Şimşek said the limited 0.2% monthly increase in food prices, driven by the extended decline in fresh fruit and vegetable prices, and the drop in fuel costs supported the inflation outlook.
"We expect disinflation to continue for the remainder of the year, supported by the normalization of commodity prices, rule-based pricing practices, a downward trend in rent inflation and a moderate demand outlook," he wrote on the social media platform X.
Yılmaz said the factors supporting the disinflation process are expected to become more pronounced in the second half of the year.
"The trend toward normalization in global conditions and steps toward peace and diplomacy aimed at reducing geopolitical tensions are limiting the pressures on energy and commodity prices, which supports the outlook for external cost conditions," he said on X.
He also noted that a more favorable outlook following last year's drought and frost could support food inflation. "The low volatility of the Turkish lira and increased predictability are also contributing to the disinflation process through pricing behavior and expectations," Yılmaz added.
Ahead of the data, Dutch financial giant ING said that if June inflation confirmed that disinflation had resumed, the central bank could restart weekly repo auctions and bring the weighted average cost of funding closer to the 37% policy rate.
Last month, the Central Bank of the Republic of Türkiye (CBRT) held its one-week repo rate steady for a third consecutive meeting as it monitored the impact of the Middle East conflict.
Since the war started, the bank has halted an easing cycle that began in late 2024 and taken other liquidity steps that pushed the Turkish lira overnight rate up to the 40% limit.
The CBRT raised its end-2026 inflation forecast to 24% from 16% in its quarterly inflation report published in mid-May, saying the short-term inflationary effects of the Iran war would remain "pronounced."
The bank projects inflation falling to 15% at the end of 2027 and 9% at the end of 2028.
CBRT Governor Fatih Karahan has said the duration of regional tensions and any disruption to energy supplies would be key to assessing the inflationary impact.
The TurkStat data also showed the domestic producer price index rose 1.80% month-over-month in June for an annual increase of 28.09%.
