Central Bank of the Republic of Türkiye (CBRT) said on Tuesday that the pricing pressures due to the Iran war are weighing on disinflation, but do not alter policy commitment.
The conflict is dealing a huge shock to the global economy after it triggered the closure of the Strait of Hormuz, the key waterway through which around 20% of the world's oil formerly passed.
The surge in energy prices poses a challenge for import-heavy economies like Türkiye, where inflation rose to 32.37% in April, the highest measure since October 2025.
"We are feeling the effects of the war, especially in energy and transportation service prices. In April, we also clearly saw the effects of this situation on inflation," CBRT Governor Fatih Karahan told the Parliament's Planning and Budget Commission.
"We think that the energy-related impacts will continue in the short term."
Annual energy inflation rose by 19 percentage points over the last two months, Karahan said.
He added that the duration of geopolitical tensions remained a critical risk factor for the inflation outlook.
"The effects on the medium-term inflation outlook will be shaped by our monetary policy stance, and we will take these factors into account in our upcoming policy decisions," he said.
The jump in costs and the resulting inflationary pressures have curbed central banks' room to cut interest rates.
CBRT flagged rising risks in its monetary policy committee statement last month, when it kept its benchmark policy rate steady, saying it was closely monitoring fallout from the Iran war and potential second-round effects.
Before the conflict began shifting expectations, the CBRT had been expected to continue a rate-cutting cycle that began in late 2024.
Although inflation has fallen significantly compared with its peak reached in May 2024, Karahan said price growth remains elevated.
He also said inflation expectations had not declined to the extent desired and remained above the central bank's forecasts.
In February, the bank raised its year‑end inflation forecast range by two percentage points to 15%-21%, while keeping its interim 16% target unchanged.
It is due to present its second inflation report of the year next week. Analysts say it will likely feature a revision of both the target and forecasts.
Karahan reiterated that the central bank would continue using all monetary policy tools in line with its primary objective of price stability.
Looking at growth, Karahan said global economic expansion was expected to slow markedly in 2026, likely weakening external demand for Türkiye.
On credit trends, he said commercial loan growth had accelerated somewhat over the last two quarters, with the recent increase in overall lending mainly driven by business loans.
