August 2026

The memorandum of understanding signed between Iran and the US in June lost its effectiveness in July, and the renewed intensification of the conflict increased uncertainties surrounding the global economy. Rising security risks in the Strait of Hormuz and the Red Sea also led energy prices to increase again. This outlook raised questions over the future trajectory of inflation, which had declined in many economies in June with the support of lower energy prices. Against this backdrop, leading central banks adopted a wait-and-see approach at their meetings in July, while a growing number of policymakers advocated interest rate hikes in response to rising inflationary risks. Meanwhile, second-quarter growth data indicated that global economic activity remained resilient despite the tensions in the Middle East, and preliminary PMI data suggested that this outlook broadly continued at the beginning of the third quarter. The new month began amid optimism that negotiations between the US and Iran would resume. The course of developments and the global inflation outlook will remain key determinants of major central banks’ policy decisions in September.

In Türkiye, recently released data indicated that the weak outlook on the production side persisted, while the extent of the slowdown in domestic demand continued to be closely monitored. Meanwhile, as also highlighted in the statement following the CBRT’s latest Monetary Policy Committee meeting, the course of the underlying trend of inflation remains important for inflation expectations. In this context, depending on the course and persistence of the tensions in the Middle East, the level of energy prices stands out as the most significant factor for Türkiye’s inflation outlook in the coming period. In this environment, the Inflation Report to be published by the CBRT on August 13th and the messages to be given at the briefing meeting will be closely followed. Developments in the Middle East and the course of oil prices will also be monitored in terms of the current account balance and the growth outlook.