Türkiye's inflation rate rose slightly on an annual basis to 31.5% in February, largely as expected, while the monthly figure cooled, official data showed on Tuesday.
The increase from nearly 30.7% in January marked the first uptick in the annual rate in months and tees up a tough rate decision for the central bank next week.
On a monthly basis, inflation cooled to 2.96%, compared to the higher-than-expected 4.84% increase in January, the Turkish Statistical Institute (TurkStat) said.
Beyond the price pressure, market turmoil due to war between the U.S. and Israel and neighboring Iran prompted emergency measures by the top institutions, including the central bank and the capital markets board.
These included some $8 billion in foreign exchange sales on Monday, resulting in a roughly 300 basis-point rise in the overnight rate to about 40%.
The renewed geopolitical risks, according to analysts, could prompt the Central Bank of the Republic of Türkiye (CBRT) to respond by officially halting an easing cycle that began in late 2024.
In January, the Monetary Policy Committee (MPC) trimmed the bank's main policy interest repo rate by less-than-expected 100 basis points to 37%.
In February, monthly inflation was driven by housing and food costs, according to the TurkStat, marking the second month of pressure that has raised worries about a disinflation trend that began in 2024.
Food and drinks prices rose by 6.8% over the course of the month, and housing expenditure by 2.4%, the figures showed.
Treasury and Finance Minister Mehmet Şimşek said he expected the recent high food price increases to be offset in the coming period, depending on weather conditions, while acknowledging the energy price rises triggered by the Iran conflict.
"We are working to limit the inflationary impact of rising oil prices due to geopolitical developments," he wrote on the social media platform X, adding that all policy tools are being used in coordination to sustain the disinflation process.
Year-over-year, the price surges were particularly marked in education (55.7%), housing (42.3%) and food and non-alcoholic beverages (36.4%).
Şimşek said food prices rising significantly above their long-term averages caused a temporary spike in annual inflation.
"Core goods inflation receded to 16.6%. Meanwhile, service inflation, where rigidity is high, fell below 40%, the lowest level in the last 47 months. This outlook indicates that the downward trend in inflation continues," the minister said.
The TurkStat data also showed the domestic producer price index rose 2.43% month-over-month in February for an annual increase of 27.56%.
The central bank has, in recent weeks, kept rate-cut expectations on track even as it has repeated it was ready to tighten policy if needed.
JPMorgan, which, like most analysts, had previously predicted another cut at the central bank's March 12 policy meeting, said on Monday it now expects the bank to hold rates. It also revised its year-end inflation forecast to 25% from 24%.
Last month, the central bank nudged up its year end inflation forecast range by two percentage points to 15%-21% and maintained its interim 16% target.
But amid rising geopolitical tensions and higher oil prices, market participants have begun revising their year-end inflation forecasts upward, from levels around 22% a few months ago to 25% or higher.
