Advancements in combating inflation, according to Şimşek
Turkey has made significant strides in its fight against inflation, with the headline inflation rate declining from over 42% at the start of the year to around 35% as of mid-2025[1][3]. This marks more than a year of continuous disinflation and the lowest inflation levels since late 2021.
The country's progress is attributed to a combination of fiscal, monetary, and structural measures. Treasury and Finance Minister Mehmet Şimşek expressed confidence that headline inflation would fall into the 20s by year-end[2].
At the heart of Turkey's inflation management is a tight monetary policy. The Central Bank of Turkey has maintained a high policy rate of 46%, with overnight lending and borrowing rates at 49% and 44.5%, respectively[4]. This stance aims to moderate inflation while supporting stable growth.
Fiscal and structural measures also play a crucial role. The government has prioritized food security and agricultural support, announcing a ₺706 billion agricultural support package in 2025, which includes ₺700 billion in subsidized loans for farmers[1]. This strategy helps alleviate supply-side pressures and supports price stability in key sectors like food.
The government has also set clear targets to bring inflation down to the 20% range by the end of 2025[1][2]. The central bank targets inflation at around 24%, with an acceptable range between 19% and 29%.
Improving inflation expectations among households is another key factor. This improvement is facilitated by increased housing supply, particularly in earthquake-affected areas, and subsidies for energy and food security, which stabilize consumer prices and confidence[1].
Inflation in core goods has declined to around 20 percent, while headline inflation currently stands at approximately 35 percent[5]. Rent, identified as one of the biggest drivers of the cost of living in Turkey, is being addressed through various initiatives, including the launch of social housing initiatives and a focus on closing the housing gap[2].
Turkey's resilience to shocks has increased, as the current account deficit has been reduced to between 1 and 1.5 percent of GDP over the past two years[5]. This has been achieved through effective management of multiple external shocks over the past three months, including regional conflicts, trade tensions, and other global developments[5].
The economic program in Turkey has led to a significant improvement in the country's external balance[5]. Moreover, the country's gross external financing needs are declining, according to Minister Şimşek[5].
Recent data shows a marked acceleration in household confidence, a positive sign for Turkey's economic future[6]. As of May, annual inflation had fallen to its lowest level in three and a half years[5]. With ongoing policies, the government aims to bring inflation into the low 20% range by year-end, marking a significant step towards permanently low single-digit levels of inflation.
The Treasury and Finance Minister, Mehmet Şimşek, has expressed confidence that headline inflation will fall into the 20s by year-end, aligning with the government's target of bringing inflation down to the 20% range by the end of 2025. This reduction in inflation is not solely a result of monetary policy but also a combination of fiscal, structural, and political efforts, as the government has prioritized food security and agricultural support, and set clear targets for the central bank to manage inflation.
