Economy July 13, 2026 09:10 AM

JPMorgan Flags Persistent Inflation Momentum in Turkey, Sees 29% Rate by Year-End

Bank warns a cautious path on interest rate cuts is needed as current account pressures and wage dynamics shape the outlook

By Avery Klein
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JPMorgan economist Fatih Akcelik warns that elevated inflation momentum in Turkey means policymakers should be careful with rate reductions in the second half of the year. The bank forecasts inflation reaching 29% by the end of 2026 and highlights several external and domestic factors that will determine the inflation path and external balance.

JPMorgan Flags Persistent Inflation Momentum in Turkey, Sees 29% Rate by Year-End
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Key Points

  • JPMorgan projects Turkey's inflation will reach 29% by the end of 2026, underscoring persistent inflation momentum.
  • The bank advises a cautious approach to interest rate cuts in the second half of the year and supports maintaining high real interest rates.
  • The basic current account balance has moved nearer to levels seen in prior foreign-exchange crises; lower oil prices and slower growth in H2 are expected to prevent further deterioration.

JPMorgan economist Fatih Akcelik says inflation momentum in Turkey remains high, prompting a recommendation for cautious and gradual interest-rate reductions during the second half of the year. In a note on Turkey's macroeconomic outlook, Akcelik and his team project headline inflation will be 29% by the end of 2026.

The bank argues that the persistence of inflationary pressures underpins the case for measured rate cuts and for keeping real interest rates at elevated levels. That view reflects concern that rapid easing could undermine progress on price stability while the forces behind inflation remain active.

On external balances, JPMorgan reports that Turkey's basic current account position has shifted closer to levels previously observed during episodes of foreign exchange stress. The bank expects that a combination of lower oil prices and slower economic growth in the second half of the year will reduce the risk of further deterioration in the current account.

Labor-income dynamics are also highlighted. JPMorgan forecasts the gap between the minimum wage and the so-called hunger threshold will widen to about 35% by the end of 2026. The bank interprets the magnitude of the minimum wage increase set in December as an indicator of political timing - specifically the scheduling of elections and the policymaking that typically precedes them.

Fiscal policy is judged to be neutral for the current period, a shift from the restrictive stance maintained in 2025. That assessment suggests neither a stimulative nor a contractionary fiscal impulse is expected to materially alter the inflation path in the near term.

Leading indicators point toward subdued activity in the second quarter, but JPMorgan cautions that weak growth will only marginally help disinflation. The bank identifies several variables it sees as decisive for inflation in the coming months: exchange rates, minimum-wage revisions, food-price movements and energy costs.


Key variables to watch:

  • Exchange-rate developments
  • Minimum wage adjustments
  • Food price trends
  • Energy price movements

Risks

  • Exchange-rate volatility could sustain inflationary pressures and complicate monetary policy - impacting financial markets and import-dependent sectors.
  • Minimum wage increases and food or energy price shocks could push inflation higher than projected - affecting consumer-facing sectors and real incomes.
  • Uncertainty around growth momentum means weak activity may only marginally aid disinflation, prolonging elevated inflation - relevant to policymakers and interest-rate-sensitive markets.

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