This week's release of the first quarterly inflation report of 2026 by the Central Bank of the Republic of Türkiye (CBRT) is expected to serve as an early test of the country's disinflation drive.

Analysts broadly expect policymakers to revise their year-end inflation forecasts upward, but markets will also be looking at potential clues on the interest rate path for the coming months.

Annual consumer price growth has continued to ease steadily, though monthly volatility has persisted. That is seen as one of the factors behind the central bank's more cautious easing cycle.

Some officials and analysts now say policymakers may need to either slow the pace of rate cuts that began more than a year ago or tolerate a slower rate of disinflation. Most expect a combination of both.

Authorities have been pursuing a more than 2.5-year effort to curb inflation, which has gradually fallen to around 30% as of last month, after peaking near 75% in mid-2024.

Vice President Cevdet Yılmaz said on Saturday that Türkiye's tight and disciplined monetary and fiscal policies were vital but "not enough," stressing that supply-side policies could also help to tame annual inflation that had risen as high as 75% in mid-2024.

Yılmaz said the 45-point fall in inflation since May 2024 was not enough, adding the government was on a path to further lower consumer prices.

"We will maintain our tight monetary policy, we will keep our disciplined fiscal policies, we are determined to do this. But these are not enough either. On the other hand, we have to contribute to our battle with inflation through our supply-side policies," he added.

Lifting forecasts

Attention will turn to Thursday's inflation report, where Governor Fatih Karahan is widely expected to raise the bank's year-end forecast from the current 13%-19% range.

Karahan could even nudge the bank's interim end-2026 target up from 16%, though that move is less certain, given that the target is meant to remain largely fixed in order to guide policy expectations, the analysts say.

Last month, consumer price inflation surged nearly 5% month-over-month, a higher-than-expected uptick that officials attributed to "seasonal factors" and one-off adjustments.

It is expected to slow to around 3% this month.

Easing cycle

Monetary policy easing has zig-zagged since the central bank first cut its key interest rate from 50% in late 2024.

Nearly a year ago, it briefly reversed course due to market volatility, and has since slashed rates by 300 basis points, then 250, 100, 150, and again by 100 points to 37% last month.

Having already slowed its easing, the central bank warned last month about risks to the disinflation process and said it would tighten policy if there were a "significant deviation in inflation outlook from the interim targets."

Some analysts predict the central bank may need to pause the cuts, possibly as soon as its next rate decision in March, to avoid this deviation.

Wall Street bank JPMorgan raised its year-end consumer price index (CPI) forecast to 24% from 23% and predicted a series of 100-point cuts this year, with the chance of a smaller easing in March due to restaurant and food price pressure during the Muslim holy month of Ramadan.