Updating Türkiye’s 2026–2027 inflation path with the Medium-Term Programme revision and the CBRT’s war-effect estimate
ABSTRACT
On 6 September 2026 the Medium-Term Programme (MTP) 2027–2029 raised Türkiye’s 2026 year-end inflation forecast from 16% to 28.4%, and the CBRT put the war’s direct and indirect effect at about 7 points. This simulation updates the disinflation path published on this site in August with data released since then. It decomposes the 12.4-point revision, computes the monthly path each year-end outcome requires from cumulative August inflation of 22.07%, and maps three conditional branches without probabilities. The MTP figure needs monthly inflation of about 0.99% in October–December if September matches the survey’s 2.12%. If September matches the survey and later months repeat August’s 1.84%, year-end inflation reaches about 31.7%, and the annualised pace of 24.5% exceeds the 2027 programme figure.
1. Purpose and method
The energy price shock that followed the war of 28 February 2026, and the restriction of Hormuz transit from early March, broke Türkiye’s 2026 disinflation programme. The official measure of that break is the MTP announced by Vice President Cevdet Yılmaz on 6 September: the 2026 year-end forecast moved from 16% to 28.4%, and the CBRT’s estimate of the war effect was put at about 7 points (Euronews Türkçe, 2026). The claim tested here is that the energy shock explains most of the revision, that the remaining 5.4 points are consistent with the shock persisting through rigid expectations, and that the new 28.4% figure carries upside risk.
This piece is an update to the “Disinflation Path Simulation 2026–2028” published on this site on 12 August. It does not repeat that simulation’s oil-price branches or its 2027 indexation argument. What is new is the MTP revision, the CBRT’s war-effect figure, August price data, the September expectations survey and the monthly diesel tax schedule. The branches below are conditional on the monthly inflation path from September to December; no probabilities are assigned. All computations are the author’s; sources supply the inputs.
Pass-through is defined in three channels: direct effects on energy items in the CPI basket, indirect effects through transport, food and manufacturing costs, and second-round effects through wages, pricing and expectations. Expectation rigidity here means expectations that stay above realised inflation and official targets and adjust slowly to new information. Choi et al. (2018) find that oil pass-through varies across countries and periods, and Çatık and Önder (2011) show that in Türkiye the effect of oil prices depends on the inflation regime.
2. The published baseline
TurkStat data show August 2026 CPI up 1.84% on the month and 31.51% on the year, with cumulative inflation since January at 22.07% (Dünya Gazetesi, 2026a). Transport rose 4.82% on the month and 35.08% on the year; housing, water, electricity and gas rose 39.77% on the year. Food rose 33.79% on the year but only 0.22% on the month. Prices rose in 134 of 174 tracked sub-items.
In the CBRT’s September survey of market participants, expected September inflation was 2.12%, year-end 2026 expectations rose from 29.43% to 29.61%, the 12-month-ahead figure barely moved from 23.69% to 23.70%, and the 24-month-ahead figure rose from 18.03% to 18.32% (Uzmanpara, 2026a). The Monetary Policy Committee held the policy rate at 37% on 10 September, and its summary put household inflation expectations at 45.6% (Dünya Gazetesi, 2026c). The MTP projects 13.5% for 2028 and 9% for 2029; its 2027 figure is reported as 21% by Euronews Türkçe and 22% by Dünya (Euronews Türkçe, 2026; Dünya Gazetesi, 2026b).
3. The identifying assumption set
1. Additive decomposition: 28.4 − 16 = 12.4 points, of which about 7 (56%) is the CBRT war effect and about 5.4 (44%) the residual.
2. Compounding identity: year-end inflation = 1.2207 × (1 + m_Sep)(1 + m_Oct)(1 + m_Nov)(1 + m_Dec) − 1.
3. Diesel special consumption tax (ÖTV): set at TRY 3 per litre in September, 6 in October, 9 in November, 12 in December and 13.9006 from 1 January 2027 (QNB Invest Araştırma, 2026).
4. Diesel reference price: TRY 77.48 per litre in Istanbul on 30 August (Habertürk, 2026) and TRY 96.30 on 22 September (Hisse.net, 2026), a rise of 24.3%.
5. 2027 benchmark: a 21% target requires 1.21^(1/12) − 1 = 1.60% a month; 22% requires 1.67%.
4. Branch A: the MTP path holds
Condition: September inflation equals the survey’s 2.12%, and October–December inflation averages what the 28.4% year-end figure requires.
Mechanism: monthly inflation must fall well below August’s pace while administered tax steps continue. Arithmetic: reaching 28.4% from 22.07% requires 1.284 / 1.2207 − 1 = 5.19% cumulative over September–December, or 1.27% a month. With September at 2.12%, the October–December requirement is 1.284 / (1.2207 × 1.0212) − 1 = 3.00%, or 0.99% a month. Each monthly ÖTV step of TRY 3 equals 3.1% of the 22 September Istanbul diesel price before any VAT effect, so the branch requires non-energy items to slow more sharply than energy items.
Indicators: September CPI on 5 October (Uzmanpara, 2026a); October CPI below 1%.
5. Branch B: the market survey path
Condition: year-end inflation matches the survey’s 29.61%, with September at 2.12%.
Mechanism: the residual 5.4 points behave as persistence, keeping monthly inflation above the MTP path without returning to August’s pace. Arithmetic: 1.2961 / 1.2207 − 1 = 6.18% cumulative over September–December; with September at 2.12%, the October–December requirement is 1.2961 / (1.2207 × 1.0212) − 1 = 3.97%, or 1.31% a month. The MTP is exceeded by 29.61 − 28.4 = 1.21 points.
The term structure of expectations supports this branch. A stable 12-month expectation alongside a higher 24-month expectation indicates that participants price the energy shock as extending disinflation, which a temporary level shock would not produce.
Indicators: the Monetary Policy Committee meetings of 22 October and 10 December (Uzmanpara, 2026b); the next survey’s 24-month expectation.
6. Branch C: the August pace persists
Condition: September inflation is 2.12% and monthly inflation then stays at August’s 1.84%.
Mechanism: second-round effects through expectations sustain the August pace. Household expectations at 45.6% sit 45.6 − 31.51 = 14.09 points above realised annual inflation, so price-setters and wage bargainers may anchor on a figure higher than past inflation. Kilian and Zhou (2022) show that rising US gasoline prices lifted household inflation expectations; the 24.3% diesel increase between 30 August and 22 September suggests the same mechanism may operate in Türkiye. Arithmetic: 1.2207 × 1.0212 × 1.0184³ − 1 = 31.7% at year-end, 3.3 points above the MTP. The August pace annualised is 1.0184¹² − 1 = 24.5%, above the 2027 target under either reported figure: 21% requires 1.60% a month and 22% requires 1.67%. The 1 January step from TRY 12 to 13.9006 adds TRY 1.90, or 2.0% of the 22 September diesel price before VAT.
Indicators: monthly CPI above 1.8% in October and November; household expectations remaining near 45.6%.
7. Failure conditions and limitations
The 7-point figure reached the public through the Vice President, not as a published CBRT model output; its Brent assumption and pass-through coefficient are unknown. Given the regime dependence found by Çatık and Önder (2011), a linear coefficient could understate the war effect in a high-inflation period, so 7 points should be read as a lower bound and part of the residual may belong to the energy shock. The 16% forecast may have been optimistic before the war, but the sources contain no pre-war monthly path to measure this. Food does not explain the residual: its high annual rate was carried from earlier months, given August’s 0.22% monthly rise. The exchange-rate channel is not separated because no sourced pass-through data were used. Monthly figures are not seasonally adjusted, and the 2027 MTP figure conflicts across sources.
8. Outlook: Türkiye, Saudi Arabia and the World
For Türkiye, September CPI on 5 October separates the branches. A print well above 2.12% would push the October–December requirement for 28.4% below 1% a month and widen the gap with market expectations. The 22 October and 10 December meetings will show whether that gap becomes a policy response. For 2027 the decisive variable is how fast household expectations fall; if they stay near 45.6% even as energy prices ease, the MTP’s 2027 figure also faces revision.
For Saudi Arabia, output is the main supply variable acting on Türkiye’s fourth-quarter path through Brent. The IEA reports Saudi crude output falling from 8.24 mb/d in July to 5.97 mb/d in August (International Energy Agency, 2026). The East–West pipeline restarted at low rates on 22 September after the September strikes, with full capacity expected in six to eight weeks (Yap et al., 2026), which places the earliest easing of energy-driven pressure in Türkiye in early to mid-November.
Globally, the IMF and World Bank Annual Meetings in Bangkok on 12–18 October (International Monetary Fund, 2026) will update war effects on global inflation. The cross-country differences reported by Choi et al. (2018) imply that the same Brent assumption can have more persistent effects where expectations are unanchored, so global revisions cannot be assumed to pass to Türkiye one for one.
9. Conclusion
About 7 of the 12.4-point revision belongs to the CBRT’s war-effect estimate and about 5.4 points to the residual. Household expectations at 45.6%, the rise in 24-month expectations and an MTP 2027 figure above 20% make expectation rigidity the most consistent reading of that residual. The 28.4% year-end forecast requires inflation of about 1.27% a month from September to December, or 0.99% from October if September meets the survey. The survey path gives 29.61%; the August pace gives about 31.7%. The cost of disinflation comes less from the energy price jump itself than from its settling into expectations, and the 5 October data will show which branch is under way.
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Furkan Mahmut Tameroglu