Consumer price growth in Türkiye cooled more than expected in July, according to official data released Monday.
Annual inflation eased for a second consecutive month to 31.75% from 32.1% in June, the Turkish Statistical Institute (TurkStat) said.
The decline in inflation had stalled following a sharp rise in energy prices caused by the Iran war.
Monday's data showed the disinflation trend continued despite the challenging global conditions, Treasury and Finance Minister Mehmet Şimşek said.
In a post on X, Şimşek emphasized that the rigidity in service inflation has been broken and that the government would not compromise on fiscal discipline.
On a monthly basis, consumer prices increased 1.78%, accelerating from a 0.99% rise in June, TurkStat said.
Both annual and monthly figures came below market expectations.
The data showed the consumer price index (CPI) rose 19.86% compared with December 2025, while the 12-month moving average increase stood at 31.9%.
"Despite unprocessed food and administrative prices pushing inflation higher, softer inflation in several non-food categories drove the downside surprise," said analysts at the Dutch financial giant ING.
Among the three expenditure groups with the largest weights, annual prices increased 40.32% for housing, water, electricity, gas and other fuels, 37.53% for food and non-alcoholic beverages, and 30.83% for transportation.
Food and non-alcoholic beverages contributed 8.94 percentage points to the annual inflation rate, transportation 5.22 points, and housing 5.21 points.
Year-over-year inflation for education and rent fell by 31 percentage points and 34 percentage points, respectively, Şimşek said.
"Thanks to the measures we have taken and the impact of the disinflation process, inflation in the services sector is becoming less persistent," he noted.
"While effectively managing risks stemming from geopolitical developments, we are not compromising on fiscal discipline or our goal of sustainable price stability."
On a monthly basis, transportation prices rose 2.59%, housing costs increased 2.25%, and food and non-alcoholic beverage prices climbed 1.61%, the TurkStat data showed.
Vice President Cevdet Yılmaz said the temporary acceleration in monthly inflation reflected higher oil prices following renewed U.S.-Iran hostilities, adjustments in administered prices and increases in fresh fruit and vegetable prices.
He added that annual inflation in core goods declined to 16.82%.
Domestic energy prices, which had fallen in May and June, rose in July, led by fuel and electricity costs amid geopolitical developments, Yılmaz said on the Turkish social media platform NSosyal.
"We will continue to implement supply-side reforms alongside monetary and fiscal policies to strengthen the purchasing power of our citizens and achieve a sustainable increase in welfare in line with our goal of lasting price stability," he said.
Yılmaz added that Türkiye would maintain measures aimed at limiting the inflationary impact of geopolitical developments.
The Central Bank of the Republic of Türkiye (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.
According to analysts at ING, uncertainty surrounding oil prices, along with their spillover effects on other commodity prices, continues to pose risks to the inflation outlook.
They also said the government's decision to gradually unwind the sliding scale mechanism adds to the challenges.
Launched in March, the mechanism allows reductions in the special consumption tax (ÖTV) to offset increases in global oil prices and limit their impact on domestic fuel prices and inflation.
Monday's TurkStat data also showed the domestic producer price index (PPI) stood at 1.5% in July, easing from a 1.8% pace in June. More than half of the monthly increase was driven by electricity and gas production.
On an annual basis, it dropped to 27.8%, the lowest in the last five months.
"Global commodity prices and particularly oil prices in the current geopolitical backdrop will remain the key risk factors to the PPI, which is on a gradual uptrend," said analysts at ING.
