Turkey’s inflation is now expected to end 2025 at 29.75%, according to a Reuters poll, up one percentage point from previous estimates.
The revision comes after a sharp selloff in Turkish assets, triggered by the arrest of Istanbul Mayor Ekrem Imamoglu—President Erdogan’s main political rival. The Turkish lira briefly plummeted to a record low of 42 against the U.S. dollar before stabilizing near 38, following aggressive intervention by the central bank, which tightened its funding rate by 400 basis points and sold $27 billion in reserves.
The political turmoil has raised investor concerns over the rule of law and jeopardized Turkey’s recent efforts to bring inflation under control. The March inflation rate is expected to dip slightly to 38.9% annually, while monthly inflation may rise to 3%. Morgan Stanley now forecasts a higher year-end policy rate of 33.5%, warning that April and May inflation may spike due to currency depreciation.
Despite a shift to orthodox policy since mid-2023, Turks’ confidence in price relief may be wavering. All eyes are now on the central bank’s next rate decision on April 17 and the March inflation report due April 3.
