Economy
Inflation expectations tick up across board in March: CBRT survey
Inflation expectations among sectors for the 12-month-ahead consumer prices ticked up slightly across the board in March, according to the survey released by the Turkish central bank on Wednesday.
In March 2026, 12-month-ahead annual inflation expectations, compared to the previous month, increased by 0.07 points to 22.17% for market participants, by 0.90 points to 32.90% for the real sector, and by 1.08 points to 49.89% among households, the Central Bank of the Republic of Türkiye (CBRT) said.
Like this, the highest increase was observed in the households category, where rigidity in expectations was generally higher in the past, too.
Sectoral Inflation Expectations are obtained by compiling the 12-month-ahead annual consumer inflation expectations of financial and real sector experts, manufacturing industry firms and households, based on the Survey of Market Participants, the Business Tendency Survey and the Household Expectations Survey conducted in cooperation with the Turkish Statistical Institute (TurkStat).
The annual inflation rate in the country rose slightly on an annual basis to 31.5% in February, compared to 30.7% in January and marked the first uptick in the annual rate in months, according to official data.
In response, and amid the escalation of the conflict in the Middle East, the CBRT has opted to keep rates on hold at 37% at its last policy meeting.
The product/service groups that households assessed as having increased the most in price over the past year and expected to increase the most in the next 12 months were “food” and “fuel and energy,” the CBRT survey revealed.
The expectation for the rise in house prices at the end of the next 12 months, meanwhile, decreased slightly by 0.36 percentage points compared to the previous month, standing at 35.05%.
British consumer price inflation remained steady at 3.0% in February, unchanged from January’s rate, official data showed on Wednesday, ahead of a likely upward lurch as war in the Middle East pushes up prices of ordinary goods, including fuel, worldwide.
Lower petrol prices in February helped offset a rise in clothing costs, the Office for National Statistics (ONS) said, but that relief looks set to prove short-lived, with oil prices now around 50% higher than a month ago.
“Today’s inflation report is little more than a relic of the world before the Iran conflict,” Luke Bartholomew, deputy chief economist at fund managers Aberdeen, said.
Before the U.S.-Israeli attack on Iran at the end of February, the Bank of England (BoE) had forecast that inflation would fall to close to its 2% target in April, when changes to regulated household energy bills and other prices take effect.
But last week the BoE sharply increased its inflation forecast, predicting it would rise towards 3.5% by the middle of the year.
Inflation expectations jump
A survey published on Tuesday by U.S. bank Citi showed inflation expectations among the British public for the coming year have surged to 5.4% from 3.3%, their biggest monthly increase in more than 20 years, adding to the BoE’s challenge.
While most households’ energy tariffs are currently capped, new prices are due to take effect in July and manufacturers have already reported the sharpest jump in costs since 1992, which may soon be passed on to consumers.
Financial markets on Wednesday were betting on two or three quarter-point interest rate rises by the BoE this year, though many economists think the central bank will keep rates on hold due to the headwinds to growth from higher energy costs.
BoE Governor Andrew Bailey last week advised people against making any firm bets that the BoE would raise rates.
Services inflation eases
Wednesday’s data showed services price inflation, which the BoE watches closely as a gauge of longer-term inflation pressures, fell to 4.2% in February from 4.4% in January, its lowest since March 2022 and just below economists’ expected reading of 4.3%.
The decline reflected reduced inflation for restaurants, cafes and tickets for concerts and other cultural events.
However, core inflation, which excludes more volatile food, energy, alcohol and tobacco prices, rose slightly to 3.2% from 3.1%, where it had been expected to hold.
“The upside surprise in core inflation today will be of concern for the Bank, given it shows we are still contending with sticky price pressures even before accounting for the recent spike in energy prices,” Zara Nokes, global market analyst at J.P. Morgan Asset Management, said.
British inflation is the highest among major advanced economies, and the country’s reliance on natural gas for electricity generation and heating makes it vulnerable to price shocks.
Prime Minister Keir Starmer’s government has introduced measures to limit rises in the cost of living, although Treasury chief Rachel Reeves said on Tuesday any household energy subsidies this year would be more narrowly targeted than during the last gas price surge in 2022.
After the data, Reeves highlighted government measures taking effect next month, which would reduce some fixed costs in household energy bills, and said the government would be “acting to protect people from unfair price rises if they occur.”
British inflation rose to its highest since 1981 in October 2022 at 11.1%, and over the past five years has rarely been near its 2% target.
Global food and agriculture value chains are under pressure from rising energy and logistics costs fueled by the U.S.-Israel-Iran conflict, affecting everything from production to delivery, according to the head of the International Association of Operative Millers (IAOM) Eurasia Eren Günhan Ulusoy.
The primary issue is a transport chain that has become more expensive, slower and increasingly uncertain, rather than just energy prices, Ulusoy said in a press release earlier this week.
These developments will impact costs in the short term, pricing in the medium term, and overall competitiveness in the long term, according to Ulusoy.
The Strait of Hormuz, which has been largely closed since the war began on Feb. 28, is a key route for energy and fertilizer sources.
He noted that rising diesel and fertilizer costs will be decisive for new season crops in the Northern Hemisphere, particularly for corn and other grains.
High diesel prices increase costs before farmers even enter the field, while expensive fertilizer leads to either lower usage, threatening yield and quality, or higher production costs, he stressed.
Fertilizer supply risks are growing due to both energy costs and restrictive trade policies and quotas seen globally, Ulusoy highlighted.
Türkiye’s strategic role in food security
However, he indicated that Türkiye has maintained its position as the world flour export champion for 10 years, accounting for 23% of global trade despite producing 15 million tons against a total capacity of 32 million tons.
Ulusoy said Türkiye’s strong production culture, advanced industrial infrastructure and rapid delivery capabilities provide a significant competitive advantage in reaching broad geographies.
The Ministry of Agriculture and Forestry and the Turkish Grain Board (TMO) play a vital regulatory role in managing the domestic grain market, he emphasized.
TMO acts as a strategic mechanism to ensure market stability by setting reference purchase prices that protect producer income during volatile periods.
TMO’s strategic grain stocks also allow for market intervention to regulate supply and limit sudden price fluctuations during global crises, Ulusoy added.
He said this intervention capacity serves as a safeguard for food supply security by balancing producer protection with the prevention of extreme consumer price volatility.
Türkiye’s unemployment rate dropped to a historic low of 8.3% last year, marking its lowest level in 21 years, according to the official data from the country’s statistical authority on Wednesday.
The rate was down by 0.4 percentage points from the previous year, according to the Turkish Statistical Institute (TurkStat).
The number of unemployed people age 15 and over in 2025 was down by 147,000 to 2.96 million.
Joblessness stood at 6.8% among men and 11.3% among women in the same period.
Meanwhile, employment also declined, with 54,000 fewer people working, bringing the total number of employed to 32.56 million.
The overall employment rate was down to 49%, including 66.4% for men and 32.1% for women.
The labor force also shrank by 200,000 to 35.53 million, with the participation rate at 53.5%.
Youth unemployment, covering those aged 15 to 24, fell 1 percentage point from 2024 to 15.3% last year. It was 11.7% for men and 22.1% for women.
Squeezed by disruptions in oil and gas markets, many Asian countries are now turning to coal to meet their energy demands despite concerns about pollution and emissions.
The continent is exposed because it relies on imported fuel, much of it passing through the Strait of Hormuz – a chokepoint for about a fifth of global oil and natural gas trade.
Liquified natural gas (LNG) is a natural gas cooled to liquid form for easy storage and transport. It has been promoted as a bridge fuel in the shift from oil and coal to cleaner energy sources. The U.S. has sought to expand exports of LNG across Asia. It burns cleaner than coal, but still emits climate change -causing gases, especially methane.
However, the war in the Middle East, which began after the U.S. and Israel launched strikes on Iran late last month, has countries shifting back to coal to cover LNG shortfalls.
India is burning more coal to meet higher summer demand. South Korea has lifted caps on electricity from coal. Indonesia is prioritizing using its domestic supply. Thailand, the Philippines and Vietnam are boosting coal-fired power.
Burning more coal risks worsening smog in major cities, slowing the transition to renewable energy and increasing the region’s planet-warming emissions.
Coal is a short-term fix, experts say, while renewables are the long-term solution. Continued reliance on coal exposes Asia to future shocks, said Julia Skorupska of the global coalition Powering Past Coal Alliance.
“This kind of crisis is a real sort of warning,” she said.
Default backup
Coal is integral to Asia’s emergency energy plans. Its wide availability in Asia makes it the default backup when renewables or gas fall short, said Sandeep Pai, an energy expert at Duke University.
China, the top coal consumer and producer, has built record coal power generating capacity since 2021 to improve its energy security. Its national policy calls for continued use of coal, even as its vast clean energy capacity offers some relief.
India, the second-largest coal consumer and producer, is bracing for a scorching summer and will rely more on coal to meet peak demand of 270 gigawatts (GW) – nearly twice the electricity Spain can produce. It has enough coal for about three months, with some stockpiles earmarked for small businesses.
Two Indian liquefied petroleum gas (LPG) shipments totaling more than 92,700 tons recently made it through the Strait of Hormuz. Such imports will likely be directed to industries such as fertilizer production rather than power generation, Pai said.
Vulnerability
Coal advocates such as Michelle Manook of FutureCoal say the shortfall would be worse without coal and future use should be strategic. “The lesson has to be diversity,” she said.
Pauline Heinrichs, who studies climate and energy at King’s College London, points to China’s boosting use of coal to offset hydropower shortfalls due to droughts, worsening emissions that contribute to climate change.
“You learn to respond to shocks generated by certain insecurities by reproducing the insecurity,” she said.
Adding to the vulnerability for import-dependent countries, Indonesia, the world’s largest exporter, is prioritizing domestic use over exports. That could tighten regional supplies and push global prices higher, said Putra Adhiguna of the Energy Shift Institute.
Coal prices are set globally, leaving importers exposed to swings and disruptions. More coal does not guarantee cheap or reliable power, said Russell Marsh of E3G.
Vietnam is already facing that volatility. It increased imports after weather-related shortages, but supplies from Indonesia are now uncertain, so it’s considering importing coal from the U.S. and Laos, according to energy market tracker Argus Media.
The main price for coal used in Asia, called Newcastle coal from Australia, has risen 13% since the war began.
Higher prices will also hurt Southeast Asia, the world’s third-largest coal-consuming region, including Vietnam, the Philippines and Thailand, which are boosting coal power.
More coal use now will slow and possibly undermine long-term efforts to phase out coal-fired power.
Indonesia was already struggling to meet targets to retire coal plants early, with financing delays even before the Iran war.
Coal power in Indonesia was 48% more expensive in 2024 than in 2020 due to aging plants and higher costs, according to the U.S.-based Institute for Energy Economics and Financial Analysis (IEEFA). Subsidies to the national utility rose 24% to $11 billion, about 5% of the national budget.
Jakarta has promoted the use of LNG to ease the shift from coal. But the renewed coal use “sends a signal” that switching to gas “is not as easy as it sounds,” Adhiguna said.
South Korea has pledged to retire most coal plants by 2040 and halve its emissions by 2035. But it is allowing more use of coal when air pollution is low, and LNG is in short supply.
In 2023, South Korea needed a major renewable expansion, about 8 gigawatts of new wind annually, to meet net-zero goals, Agora Energiewende said. Growth has been slow, with renewables supplying just 10% of electricity in 2024, versus a global average of 32%, according to IEEFA.
Over the past 11 years, South Korea has committed $127 billion to fossil fuels. That’s 13 times more than it spent on renewables, with 60% of export finance going to LNG and $120.1 billion spent on fuel imports in 2024 alone, said Joojin Kim of Solutions for Our Climate.
South Korea still plans to phase out the use of coal, but the recent moves could outlast the crisis, Kim said. “The concern is not just the decision itself. It is the precedent it sets.”
For countries with limited coal, like Thailand, the impact on electricity prices would be minimal, as coal accounts for too small a share of capacity, said Jitsai Santaputra of The Lantau Group. Domestic coal makes up less than 10% of the Thai energy mix.
Burning coal produces fine particles that lodge deep in the lungs and bloodstream, raising the risk of heart disease, stroke, lung cancer and chronic respiratory disease, according to the World Health Organization (WHO).
It’s a problem across Asia, especially during seasons when farmers are burning their fields.
All 1.4 billion Indians breathe air with concentrations of these particles the WHO considers unsafe, according to a report by the Energy Policy Institute of Chicago. The government has now paused air-quality rules, allowing restaurants to burn coal to ease a gas shortage.
Vietnam also faces severe air pollution, with PM2.5 far above WHO limits. It is promoting electric bikes and has targets to cut coal use.
Lan Nguyen, a shopowner in Hanoi, said she knows coal is essential for electricity right now, but worries about her asthmatic son’s health. “I worry for my son’s lungs every day,” she said.
Business activity in the eurozone slowed down sharply in March amid the escalation of the war in the Middle East, which drove energy prices higher and disrupted global supply chains, a closely watched survey showed Tuesday.
The HCOB Flash Eurozone purchasing managers’ index (PMI) published by S&P Global, an important gauge of the overall health of the economy, registered a significantly lower figure of 50.5 this month, down from 51.9 in February.
A reading above 50 indicates growth, while a figure below 50 shows contraction.
“The flash Eurozone PMI is ringing stagflation alarm bells as the war in the Middle East drives prices sharply higher while stifling growth,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said.
“Firms’ costs are rising at the fastest rate for over three years amid the surge in energy prices and choking of supply chains resulting from the war,” he added.
The European Union has also warned of the risk of stagflation, a troublesome blend of high inflation and anaemic growth.
Energy prices have soared since the United States and Israel’s war against Iran triggered Tehran’s retaliation that disrupted oil deliveries through the Strait of Hormuz.
The key survey also found manufacturers reporting the “most marked lengthening of suppliers’ delivery times in over three-and-a-half years.”
Eurozone inflation reached 1.9% in February, but the European Central Bank (ECB) has warned that the energy shock caused by the Middle East war would sharply push up inflation and hit the single currency area’s growth.
The Frankfurt-based bank’s projections forecast that eurozone inflation would come in at 2.6% over this year, above its 2% target.
The inflation reading for March will be published next Tuesday.
Williamson said he expected growth to slow to a quarterly rate of just below 0.1% in March and warned inflation could accelerate to near 3%.
He added the ECB “will have to tread a cautious path with respect to policy in the face of a clear and rising risk of stagflation in the coming months.”
Türkiye’s manufacturing capacity utilization rate remained stable in March, at 74.0%, while confidence in the real sector declined in the same month, official data showed on Tuesday.
On a seasonally adjusted basis, the capacity utilization rate in the manufacturing industry remained steady at 74.0% compared with the previous month, data from the Central Bank of the Republic of Türkiye (CBRT) revealed.
In contrast, the unadjusted rate declined slightly by 0.2 points, settling at 73.3%, according to the data.
The central bank also separately released the data showing that the seasonally adjusted real sector confidence index fell by 4.1 points to reach 100.0 in March.
The decline was attributed to negative assessments across all sub-indices.
Survey responses indicated weaker expectations for production volume over the next three months, a less favorable view of the general business outlook, reduced order volumes both in the past three months and currently, lower investment spending intentions, diminished export order expectations, higher inventories of finished goods and weaker employment projections.
According to CBRT data, the unadjusted seasonally adjusted real sector confidence index also declined, by 3.1 points compared to the previous month, and was at 101.0 in March.
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