Turkey inflation target pushed to 2029
Turkey’s government has admitted the return to price stability will take longer than it hoped, pushing its single-digit inflation target out to 2029 and lifting next year’s inflation forecast to 18% in a budget plan that underscores how stubborn inflation remains for households, businesses and investors.
The revised path matters because inflation is still the central macro variable shaping everything from interest-rate policy to the lira, bond yields and corporate margins. A slower disinflation process means Turkey will likely have to keep monetary policy tighter for longer, even as policymakers try to protect growth and restore credibility after years of volatile prices.
Under the 2027 budget submitted to parliament, inflation is now expected to end 2026 at about 29%, ease to 18% in 2027 and 10% in 2028, before falling below double digits only in 2029, when the government sees it near 6%. That is a meaningful reset from last year’s budget, which had penciled in 10.1% inflation for 2026 and 5.9% for 2027.
For investors, the message is straightforward: the macro environment is improving, but not quickly enough to justify complacency. High and sticky inflation erodes real returns, complicates earnings forecasts and keeps pressure on domestic demand. It also makes Turkish assets more sensitive to policy credibility, because even small disappointments can revive demand for hard currencies and push funding costs higher.
The government’s projections also sit below current private-sector estimates, suggesting officials still believe the inflation fight can be won with fiscal discipline and tight monetary conditions. But the gap between the official path and market expectations shows why confidence remains fragile. Economists point to inertia in prices, index-linked contracts, regulated tariffs and imported energy costs as reasons inflation may ease only gradually.
That is why the budget is as much about signaling as it is about arithmetic. By extending the single-digit goal to 2029 rather than abandoning it, Ankara is trying to frame the slowdown as a longer adjustment rather than a policy failure. For long-term investors, the key question is not whether inflation will eventually fall, but whether the government and central bank can keep real rates positive and fiscal policy disciplined long enough to make that outcome believable.
For now, Turkey remains a market where patience matters more than timing. Inflation is still too high for comfort, but the direction is at least clearer than it was a year ago. Investors looking at Turkish assets should keep that long runway in mind and treat any progress on disinflation as something to build on over years, not months.
| Entity | Gains | Losses |
|---|---|---|
| Turkish government | ▲Policy credibility if disinflation continues | ▼Pressure from a slower-than-planned decline |
| Central bank | ▲More room to justify tight policy | ▼Forced to stay restrictive longer |
| Turkish households | ▲Eventual relief if prices cool | ▼Higher living costs in the near term |
| Bondholders / FX investors | ▲Better long-term inflation outlook | ▼Near-term volatility and real-return risk |