Benign headline, same underlying challenges

TURKEY - Report 05 Jan 2026 by Murat Ucer

December CPI inflation came in at 0.9%, m/m, broadly in line with expectations yet marginally lower than ours, with the 12-month rate ending the year at 30.9%, down from 31.1% in November. This is just under the lower end of the forecast range of the November Inflation Report (of 31–33%), yet markedly above the Bank’s interim target of 24%. Recall that the Bank will explain the sources of the deviation from the latter in the first Inflation Report of the year (on February 12). Monthly PPI inflation was 0.8% in December, with the 12-month PPI inflation, in contrast, rising to 27.7%, from 27.2% a month earlier, and the CPI-PPI inflation wedge therefore narrowing a bit further.

In terms of contributions, the decline in the 12-month CPI inflation was driven by three sub-categories (clothing, houseware, and transportation), while food prices made a higher contribution to monthly CPI inflation this December vs. last. The latter rose by 2%, m/m, in December, as the 12-month (food inflation) rate increased to 28.3% from 27.4% a month earlier, on the back of a visible jump in unprocessed food inflation (to 21.5% from 19.4% in November), versus a slight drop in processed food inflation (to 34.3% from 34.6%).

Turning to core indicators, the most commonly referenced core measure, the C-index, rose by 0.6%, m/m, in December, with the 12-month rate easing to 31.1%, down from 31.7% in November. The B-index, another closely monitored measure (that, compared to the C-index, leaves in processed food and non-alcoholic beverages) rose at a slightly higher rate (0.8%), with the 12-month rate declining to 31.7% from 32.2% in November.

Finally, service inflation rose by a modest 0.9%, m/m, in December, but the 12-month barely eased -- to 44.0% from 44.2% in November.

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