Consumer and Business Inflation Expectations Improve in January: CBRT Survey

According to a survey by the Central Bank of Türkiye released on Jan. 28, inflation expectations among Turkish consumers and businesses showed significant improvement in January.

The 12-month-ahead inflation expectations for households dropped from 63.14 percent in December to 58.8 percent in January, marking steady progress in sentiment. This decline reflects a 17-point improvement in household expectations and a 12-point improvement in the real sector compared to May 2024, as highlighted by Finance Minister Mehmet Şimşek.

“Inflation expectations are critical to the pace of disinflation. We anticipate that expectations will further support the decline in inflation in the coming period,” Şimşek wrote on X, acknowledging that expectations remain elevated relative to the inflation outlook. He assured citizens that the government is committed to reducing inflation and enhancing purchasing power through decisive measures.

Positive Trends Amid Persistent Challenges

According to the Sectoral Inflation Expectations survey, the proportion of households anticipating lower inflation within the next 12 months rose by 4.5 points, reaching 30.8 percent. This improvement aligns with Türkiye’s annual inflation rate, which slowed for the seventh consecutive month in December 2024.

Consumer prices increased by 44.38 percent year-on-year in December, down from 47.1 percent in November, with monthly inflation easing to 1.03 percent from 2.24 percent. Household inflation expectations have steadily declined since September 2024.

The survey also revealed that 12-month-ahead inflation expectations for market participants decreased by 1.7 points to 25.4 percent, while real sector expectations fell by 3.8 points to 43.8 percent.

Despite these positive developments, the Central Bank emphasized that inflation expectations and pricing behaviors still pose risks to the disinflation process.

Central Bank Eases Rates as Inflation Trends Improve

The Central Bank continued its monetary easing cycle, reducing its policy rate — the one-week repo auction rate — by 250 basis points to 45 percent in January. This follows a rate cut in December 2024 from 50 percent to 47.5 percent, marking the first reduction in nearly two years as inflation showed signs of sustained deceleration.

While core goods inflation remained relatively low, the Central Bank noted that inflation in services items with time-dependent pricing and backward indexation contributed to a slight upward trend in January.

The bank reaffirmed its commitment to maintaining a tight monetary stance until price stability is achieved through a sustained decline in inflation. Indicators for the last quarter of 2024 suggested that domestic demand was at disinflationary levels, reinforcing the Central Bank’s cautious approach.

Long-Term Projections

Under the medium-term economic program for 2025–2027, the government projects that inflation will decrease to 17.5 percent by the end of 2025. This optimistic forecast underscores the administration’s focus on price stability and economic resilience, even as the country navigates challenges in the disinflation process.

The Central Bank’s efforts to manage inflation expectations, coupled with the government’s long-term vision, signal a measured and proactive approach to ensuring economic stability in Türkiye.