Şimşek: Inflation Expectations Are Breaking, Disinflation Is Gaining Ground

Turkey’s economic management has closed out 2025 by underlining a message of determination in the fight against inflation. Treasury and Finance Minister Mehmet Şimşek has evaluated the Central Bank’s latest Sectoral Inflation Expectations data, stressing that inflation expectations have fallen sharply across all segments of society over the past year.

Commenting on the December survey results published by the Central Bank of the Republic of Turkey (TCMB), Şimşek said the visible improvement in expectations reflects growing confidence in the government’s economic program. According to the minister, anchoring expectations remains one of the most critical pillars for achieving lasting price stability.

Sharp Decline in Expectations Across All Groups

In a statement shared via social media, Şimşek pointed to a clear downward trend in 12-month-ahead inflation expectations over the last year. The data shows that optimism has spread beyond financial markets and into households and the real economy.

Based on the figures highlighted by the minister, inflation expectations declined by 12.8 percentage points in the real sector, 12.2 points among households, and 3.7 points among market participants over the past 12 months. While the scale of improvement varies, the direction is consistent across all groups.

Şimşek emphasized that this broad-based easing is not coincidental. Instead, he framed it as a direct outcome of policy consistency and credibility. Managing expectations, he noted, is essential for the success of the disinflation process, as perceptions of future prices strongly influence wage setting, consumption behavior, and investment decisions.

Households and Firms Show Growing Confidence

One of the most notable aspects of the latest data is the improvement among households and firms, which traditionally respond more slowly to policy signals than financial markets. For much of the past two years, household inflation expectations remained stubbornly high, even when market forecasts began to moderate.

The recent drop, according to Şimşek, suggests that the impact of tighter policies and clearer communication is now reaching the broader public. Firms in the real sector have also adjusted their outlook, a development seen as particularly important for pricing behavior and contract negotiations in the services sector.

Focus on Services Inflation and Structural Measures

Beyond expectations, Şimşek highlighted services inflation as a key battleground in the disinflation effort. He argued that as expectations improve, price rigidity in services will continue to weaken, reinforcing the downward momentum in overall inflation.

However, the minister made clear that monetary policy alone will not be sufficient. He reiterated the government’s commitment to supply-side reforms aimed at reducing structural risks, boosting productivity, and strengthening competition across the economy. These measures, he said, are critical for turning short-term disinflation into lasting price stability.

According to Şimşek, the strategy rests on two main pillars. First, improved expectations combined with easing services inflation will continue to support the disinflation path. Second, policies aimed at increasing supply capacity and competitiveness will help address the root causes of price pressures rather than merely their symptoms.

“Price Stability Is the Ultimate Goal”

In his complete statement, Şimşek summarized the government’s stance in clear terms, underlining both progress and commitment:

“Twelve-month inflation expectations have declined over the past year by 12.2 points among households, 12.8 points in the real sector, and 3.7 points among market participants.
The improvement in expectations and the decline in services inflation will continue to support the disinflation process.
With the contribution of policies that reduce supply-side risks and enhance competitiveness, we aim to achieve price stability.”

Looking Ahead to 2026

As Turkey moves into 2026, the latest data provides cautious optimism for policymakers. While inflation levels remain high, the broad-based improvement in expectations is widely seen as a prerequisite for durable disinflation.

Economists note that sustaining this trend will depend on consistency—both in monetary tightening and in the implementation of structural reforms. For now, the December figures allow the government to close the year with a message of resolve: the fight against inflation is ongoing, and expectations are finally beginning to shift in the desired direction.