BBVA Sees Inflation Falling to 25% in Türkiye by 2026 as Tight Monetary Policy Holds

Spain-based banking group BBVA has forecast a significant slowdown in inflation in Türkiye, projecting consumer price growth to fall to around 25 percent by the end of 2026, alongside a policy interest rate of roughly 32 percent, provided current economic policies remain firmly in place.

According to the bank’s latest macroeconomic outlook, the ongoing disinflation process is expected to be driven primarily by tight monetary conditions, restrained domestic demand, and a gradual normalization of inflation expectations. BBVA analysts underline that the Central Bank of the Republic of Türkiye’s commitment to orthodoxy remains the cornerstone of this trajectory.

Monetary Discipline at the Core

BBVA’s assessment points to restrictive interest rates being maintained for an extended period, even as inflation eases. The bank expects policymakers to avoid premature loosening, arguing that credibility gains achieved since mid-2023 would otherwise be at risk. While headline inflation is projected to decline, BBVA cautions that the process will be uneven, shaped by wage adjustments, administered prices, and external cost pressures.

The forecast suggests that real interest rates are likely to remain positive through much of the period, reinforcing financial stability but also limiting short-term growth momentum. Economic expansion is therefore expected to stay moderate, with domestic consumption subdued and investment recovering only gradually.

External Balances and Capital Flows

BBVA also highlights improvements in Türkiye’s external financing conditions, noting that tighter policies have helped stabilize the current account balance and support reserve accumulation. While foreign investor interest has improved, the bank stresses that sustained inflows will depend on policy continuity and further progress in reducing inflation volatility.

This cautious optimism aligns with recent assessments by international rating agencies. In a separate analysis, Fitch Ratings warned that Türkiye’s post-2026 outlook remains narrow, emphasizing that gains achieved through stabilization could reverse without sustained reform momentum.

Reform Path Still Critical

While BBVA’s projections mark one of the more optimistic medium-term inflation outlooks for Türkiye among major international financial institutions, the bank stops short of declaring victory. Analysts stress that structural reforms, fiscal discipline, and clear communication will be essential to anchoring expectations and pushing inflation toward single-digit levels over the longer term.

This view echoes domestic projections previously reported by BosphorusNews, which highlighted government-backed economic models anticipating a return to single-digit inflation as Türkiye enters what officials describe as the final phase of its reform program.

A Conditional but Notable Signal

Taken together, BBVA’s forecast represents a measured vote of confidence in Türkiye’s current policy framework rather than an unconditional endorsement. The bank’s outlook suggests that inflation can be brought under control, but only if policy discipline is preserved and reform fatigue is avoided.

For investors and policymakers alike, the message is clear: Türkiye’s disinflation path is credible, but fragile—and its success will depend less on projections than on persistence.