Turkey's central bank dramatically raised inflation targets, setting 2026's target at 24% from 16% and almost doubling next year's to 15%. The bank suspended inflation range forecasts due to "elevated uncertainty" as economic strains deepen. Turkey's vulnerability stems from importing 75% of its energy needs, exposing the country to fallout from the Iran conflict. Households brace for 52% price increases this year while businesses anticipate 33% hikes.

Ankara's abandonment of inflation targets comes amid deteriorating trade conditions and a record $43bn decline in foreign reserves in March. Governor Fatih Karahan maintained the bank's current monetary policy stance at 37% interest rates. The bank continues its strong exchange rate policy, allowing the lira to appreciate in real terms to anchor inflation and attract portfolio investment.

Economists criticize Turkey's approach, noting the growing current account deficit reached $24bn in Q1, equivalent to nearly 4% of GDP annually. Analysts question whether the current policy mix remains sustainable as the deficit outpaces foreign investor demand for lira assets. "Turkey is setting off alarm bells," said Brad Setser of the Council on Foreign Relations.