Turkish Central Bank Flags Food and Services as Primary Inflation Drivers in January

The Central Bank of the Republic of Türkiye (TCMB) has published its inaugural Price Developments Report for 2026, providing a granular look at the inflationary pressures shaping the start of the year. According to the data, the Consumer Price Index (CPI) climbed by 4.84% on a monthly basis in January. Despite this monthly jump, the annual inflation rate edged down slightly, falling 0.24 percentage points to settle at 30.65%.

The report offers a nuanced view of the Turkish economy, suggesting that while the “headline” figure remains high, core inflation indicators are showing signs of cooling. The B-index (CPI excluding unprocessed food, energy, alcoholic beverages, tobacco, and gold) saw its annual rate drop by 1.55 points to 30.11%, while the C-index (the most narrowly defined core measure) fell 1.28 points to 29.80%.

A Strategic Shift: Updating the Consumption Basket

A critical technical highlight of the January report is the update to the CPI’s base year and weighting structure. Reflecting shifting consumption patterns in Türkiye, the TCMB revealed that the weight of the service sector within the index has increased significantly by 7.4 points, now accounting for 38.4% of the total basket. Conversely, the weight of goods has been revised downward to 61.6%.

This reweighting is crucial for investors and analysts to track, as it suggests that the Central Bank’s future inflation-fighting efforts will need to focus more heavily on the historically “sticky” prices of services rather than just the volatility of traded goods.

Food Prices: The Return of the “Unprocessed” Surge

Perhaps the most striking data point in the report is the sharp rise in food and non-alcoholic beverage prices, which surged 6.59% in January alone. This pushed the annual food inflation rate up by 3.38 points to 31.69%.

The TCMB noted a divergence within this category: while processed food prices showed a moderating trend, unprocessed food prices skyrocketed by 11.79% monthly. The bank identified fresh vegetables and meat prices as the primary culprits behind this spike, highlighting the ongoing vulnerability of the Turkish consumer to agricultural supply chain fluctuations and seasonal volatility.

Services and Health Costs Put Pressure on Consumers

The service sector remains a formidable challenge for price stability. Service prices rose by 7.39% in January. While the annual rate for the group actually fell to 40.23% (due to base effects), the monthly momentum remains aggressive.

Specific sub-sectors saw dramatic increases that are likely to weigh on household budgets:

• Health Services: Up 18.12%, leading the charge in the “other services” category.

• Financial Services: Increased by 14.78%.

• Transportation Services: Highlighted by a massive 36.9% increase in airfare.

• Rents: Monthly rents rose by 5.26%, though the annual rental inflation rate slowed to 56.55%.

The Central Bank characterized this upward movement in services as a “period-specific” surge—often associated with the beginning-of-year price adjustments—but warned that the underlying trend remains elevated.

Mixed Results in Goods and Energy

In contrast to the volatility in food and services, the Basic Goods category remained relatively moderate, with prices increasing only 0.51% monthly. This was helped largely by seasonal discounts in the clothing and footwear sector, which saw prices drop by 4.83%. However, durable goods like automobiles, furniture, and white goods continued to see price hikes of nearly 3%, reflecting persistent demand and perhaps the lingering effects of currency pass-through.

The energy sector saw a monthly increase of 2.29%, driven primarily by a 7.32% hike in municipal water tariffs and a 3.04% rise in electricity prices. Despite these specific hikes, the annual energy inflation rate improved, dropping nearly 5 points to 30.21%.

Producer Prices: A Silver Lining?

On the production side, the Domestic Producer Price Index (D-PPI) rose by 2.67% in January. On an annual basis, producer inflation recorded a slight decrease to 27.17%. The report indicated that while energy costs for producers actually declined during this period, the cost of manufacturing durable and non-durable consumer goods remains on the rise.

The gap between producer and consumer inflation suggests that while manufacturing costs are somewhat stabilizing, the “last mile” of inflation—getting prices down for the end consumer—remains hampered by service-sector rigidity and food supply issues.

Looking Ahead

The TCMB’s report paints a picture of an economy in transition. While the headline annual figure is moving in the right direction, the “main trend” of inflation showed a monthly acceleration that the bank attributes to the January effect. For the Turkish government and the Central Bank, the challenge for the remainder of 2026 will be tackling the structural issues in the food market and cooling the red-hot service sector without stifling broader economic activity.