The Turkish central bank shared on Thursday the open letter addressed to the government and the Treasury and Finance Ministry, evaluating the disinflation process and describing the reasons that it said had curbed the pace of disinflation.
Among the main causes that limited the disinflation, the Central Bank of the Republic of Türkiye (CBRT) listed domestic supply conditions (food prices), price increases in the services category (rents and education), administered price adjustments and inflation expectations.
In the opening part of the letter, the CBRT recalled that it is mandated under Article 42 of the Central Bank Law No. 1211 to report to the government when the inflation target "is not met" and announce to the public the reasons for the deviation from the target and the necessary measures to be taken.
"In 2025, inflation surpassed the designated uncertainty band around the target," it said.
Consumer price inflation slowed to 30.89% in December from 31.07% in November, concluding the year at a range of about 31%, in line with surveys.
The central bank's end-2025 interim inflation target stood at 24%, with a forecast range of 31%-33%.
The bank last year introduced new interim targets, separating them from forecasts and saying they would serve as "a commitment and anchor."
It also repeatedly pledged to approach monetary policy on a meeting-to-meeting basis, focusing on the inflation outlook.
However, both the bank and the government officials have also flagged the impact, particularly of food prices and climate events, noting that they have been exerting pressure on consumer prices.
Türkiye's inflation rate rose slightly on an annual basis to 31.5% in February, according to official data. Last week, amid a heightened geopolitical situation, the CBRT decided to pause its easing cycle and keep its key policy rate on hold at 37%.
The bank's Monetary Policy Committee (MPC) flagged heightened uncertainty around the inflation outlook, including rising commodity prices and risks to global inflation, the minutes of its latest meeting revealed.
The committee said that geopolitical developments, commodity price volatility and supply constraints were increasing risks to the disinflation process.
"Domestic supply conditions, which were affected particularly by drought and frost, exerted an upward pressure on food prices. The decline in crop production led to price fluctuations in the third quarter, temporarily slowing the disinflation process through expectations," the CBRT said in the open letter.
"Administered price adjustments throughout the year also had an impact on inflation. Price developments, particularly in tobacco products, natural gas and municipal water, stood out," it also suggested.
While it mentioned that demand conditions "remained at disinflationary levels throughout the year," it also pointed to the "gradual" moderation in demand, which it tied to housing construction activities in the aftermath of the earthquake as well as the trends in certain durable consumption goods.
"While inflation expectations displayed a downward trend throughout the year for most sectors, they remained above the targets. This curbed the pace of disinflation," it further said.
In the closing part of the letter, the CBRT reiterated that its primary objective "is to achieve and maintain price stability."
"In case of a significant deterioration in the inflation outlook, the monetary policy stance will be tightened. In the event of unanticipated developments in credit and deposit markets, additional macroprudential measures will be introduced," it added.
Among others, it also evaluated the tightening measures and monetary policy strategy implemented in pursuit of price stability.
The letter was co-signed by CBRT Governor Fatih Karahan and four of his deputies.