Türkiye's inflation rate cooled at a faster pace than analysts anticipated both on an annual and a monthly basis in March despite pricing pressures amid the Iran war, official figures showed on Friday.
Annual inflation dipped to 30.9%, compared to 31.5% in February, according to the Turkish Statistical Institute (TurkStat).
Energy prices have been soaring after the U.S.-Israel attacks on Iran unleashed a conflict that has run for more than a month and effectively closed the Strait of Hormuz, through which a fifth of global oil and liquefied natural gas is shipped.
That came as a test for the world economies, including Türkiye, where authorities have acted to limit the pass-through of volatile energy costs to domestic prices.
On a monthly basis, consumer prices rose 1.9%, compared with 2.96% in February, the TurkStat data showed.
Surveys had forecast monthly inflation to be 2.32%, with the annual rate seen at 31.4%, driven by a rise in fuel prices and weather-related pressures on food inflation.
Friday's data showed the biggest annual price increases were in education, at 51.97%, housing, at 42.06%, and transport, at 34.35%.
Food inflation eased by 4.8 percentage points compared with the same month last year to an annual rate of 32.4%.
Treasury and Finance Minister Mehmet Şimşek said improving climate conditions following last year's frost and drought are expected to support the food inflation outlook in 2026.
Disinflation in services, Şimşek said, is likely to become more visible thanks to declining rent inflation, government policies aimed at increasing housing supply and rule-based pricing in education.
Annual services inflation has fallen by 16.1 percentage points over the past year, he said.
The data showed the smallest increases in March were recorded in clothing and footwear, at 7.2%, furnishings and household equipment, at 20.2%, and information and communication, at 24.12%.
The food group was the key driver for the positive surprise in the headline rate, though pricing pressures in the energy group have increased with the geopolitical shock, as expected, said analysts at the Dutch financial giant ING.
The data showed transport and food prices were the biggest monthly drivers of inflation in March.
Vice President Cevdet Yılmaz linked transport cost increase to higher energy prices due to the Iran war, which he said created upward risks for the global inflation outlook.
Separate data on Friday also showed the domestic producer index rose 2.30% month-over-month in March for an annual increase of 28.08%.
Central Bank of the Republic of Türkiye (CBRT) raised its year‑end inflation forecast range by two percentage points to 15%-21%, while keeping its interim 16% target unchanged in February.
CBRT Governor Faith Karahan said earlier this week that the bank would maintain the needed tight policy to continue disinflation.
The bank has halted its easing cycle with the main rate at 37%, lifted its overnight rate by about 300 basis points to near 40%, and undertaken heavy sales and swaps of foreign exchange and gold reserves to support the Turkish lira.
Karahan defended the moves as a "natural choice" amid such market turmoil.
A slide presentation that Şimşek made to investors in London, published on Wednesday, said short-term war effects were negative but manageable.
On Friday, he said the government had taken the necessary steps to limit the economic impact of the conflict.
He said the fiscal room created during the government's medium-term program period has enabled authorities to quickly and effectively reintroduce measures such as the fuel price adjustment mechanism to ease inflationary pressures.
The "sliding-scale" system, launched last month, adjusts the special consumption tax (ÖTV) on fuel products and prevents higher oil prices from being fully passed through to consumers. Yılmaz said a significant portion of fuel price increases is being absorbed through the budget.
The mechanism has absorbed roughly two-thirds of the oil price shock and reduced the impact on the monthly figure, analysts at ING said.
While short-term geopolitical shocks may have some impact on inflation, Şimşek said, "We continue to implement our holistic and decisive policy set that will ensure we reach our goal of permanent price stability."
Yılmaz said authorities would continue to offset the direct and indirect impact of geopolitical developments through coordinated monetary, fiscal and income policies, while supporting disinflation with supply-side measures in social housing, food supply, logistics and renewable energy.
