Consumer price growth in Türkiye cooled more than expected in July, according to official data released Monday.

Annual inflation eased for a second consecutive month to 31.75% from 32.1% in June, the Turkish Statistical Institute (TurkStat) said.

The decline in inflation had stalled following a sharp rise in energy prices caused by the Iran war.

Monday’s data showed the disinflation trend continued despite the challenging global conditions, Treasury and Finance Minister Mehmet Şimşek said.

In a post on X, Şimşek emphasized that the rigidity in service inflation has been broken and that the government would not compromise on fiscal discipline.

On a monthly basis, consumer prices increased 1.78%, accelerating from a 0.99% rise in June, TurkStat said.

Both annual and monthly figures came below market expectations.

The data showed the consumer price index (CPI) rose 19.86% compared with December 2025, while the 12-month moving average increase stood at 31.9%.

“Despite unprocessed food and administrative prices pushing inflation higher, softer inflation in several non-food categories drove the downside surprise,” said analysts at the Dutch financial giant ING.

Among the three expenditure groups with the largest weights, annual prices increased 40.32% for housing, water, electricity, gas and other fuels, 37.53% for food and non-alcoholic beverages, and 30.83% for transportation.

Food and non-alcoholic beverages contributed 8.94 percentage points to the annual inflation rate, transportation 5.22 points, and housing 5.21 points.

Year-over-year inflation for education and rent fell by 31 percentage points and 34 percentage points, respectively, Şimşek said.

“Thanks to the measures we have taken and the impact of the disinflation process, inflation in the services sector is becoming less persistent,” he noted.

“While effectively managing risks stemming from geopolitical developments, we are not compromising on fiscal discipline or our goal of sustainable price stability.”

Limiting geopolitics’ inflationary impact

On a monthly basis, transportation prices rose 2.59%, housing costs increased 2.25%, and food and non-alcoholic beverage prices climbed 1.61%, the TurkStat data showed.

Vice President Cevdet Yılmaz said the temporary acceleration in monthly inflation reflected higher oil prices following renewed U.S.-Iran hostilities, adjustments in administered prices and increases in fresh fruit and vegetable prices.

He added that annual inflation in core goods declined to 16.82%.

Domestic energy prices, which had fallen in May and June, rose in July, led by fuel and electricity costs amid geopolitical developments, Yılmaz said on the Turkish social media platform NSosyal.

“We will continue to implement supply-side reforms alongside monetary and fiscal policies to strengthen the purchasing power of our citizens and achieve a sustainable increase in welfare in line with our goal of lasting price stability,” he said.

Yılmaz added that Türkiye would maintain measures aimed at limiting the inflationary impact of geopolitical developments.

The Central Bank of the Republic of Türkiye (CBRT) raised its end-2026 inflation forecast to 24% from 16% in its quarterly inflation report published in mid-May, saying the short-term inflationary effects of the Iran war would remain “pronounced.”

The bank projects inflation falling to 15% at the end of 2027 and 9% at the end of 2028.

According to analysts at ING, uncertainty surrounding oil prices, along with their spillover effects on other commodity prices, continues to pose risks to the inflation outlook.

They also said the government’s decision to gradually unwind the sliding scale mechanism adds to the challenges.

Launched in March, the mechanism allows reductions in the special consumption tax (ÖTV) to offset increases in global oil prices and limit their impact on domestic fuel prices and inflation.

PPI at 5-month low

Monday’s TurkStat data also showed the domestic producer price index (PPI) stood at 1.5% in July, easing from a 1.8% pace in June. More than half of the monthly increase was driven by electricity and gas production.

On an annual basis, it dropped to 27.8%, the lowest in the last five months.

“Global commodity prices and particularly oil prices in the current geopolitical backdrop will remain the key risk factors to the PPI, which is on a gradual uptrend,” said analysts at ING.

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Türkiye’s manufacturing sector improved slightly in July but remained in contraction, as subdued market conditions and softer domestic and international demand prompted firms to cut output and ‌jobs, a business survey showed on Monday.

The Istanbul Chamber of Industry (ISO) Türkiye Manufacturing PMI, compiled by S&P Global, rose ​to 47.7 in July from 47.1 in June, ​the survey showed. The 50-mark separates growth from ⁠contraction.

Last month signaled a further solid moderation in the health of the manufacturing sector, said the panel, adding that business conditions have now eased in 28 successive months.

“The second half of 2026 began in much ​the same way as the first half ended, with ​Turkish manufacturers struggling to generate growth amid a muted demand environment, exacerbated by the war in the Middle East,” said Andrew ​Harker, economics director at S&P Global Market Intelligence.

New ​orders fell markedly again, though the pace of decline eased slightly ‌from ⁠June. Firms linked softer demand to subdued market conditions and price pressures, while the war in the Middle East weighed on export demand.

Production declined for a ​second straight ​month, although ⁠only modestly, the survey showed. Employment also fell, with some firms citing workers resigning ​from their positions.

Purchasing activity and inventories were ​reduced ⁠in response to muted demand, the survey showed.

Inflation pressures softened further in July. Input costs rose at the ⁠slowest ​pace since November 2025, while ​the rate of increase in output prices was the weakest so far ​in 2026.

“Manufacturing production did at least moderate to a lesser degree than in June, signalling a more stable picture. Also positive was a further easing in the rate of input cost inflation which provided some breathing space for firms to limit rises in selling prices in order to try to stimulate demand,” S&P Global’s Harker said.

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Turkish exporters set three records in July, including the highest-ever July shipments, annualized exports and total goods and services sales, Trade Minister Ömer Bolat said Monday.

Exports rose 2.9% year-over-year to $25.6 billion in July, the second-highest monthly total to date, Bolat told a press conference in Istanbul.

Imports increased 5.2% to nearly $33 billion, official data showed.

The foreign trade deficit widened 14% to $7.37 billion, compared with $6.46 billion in July 2025.

Türkiye’s foreign trade volume expanded 4.1% to $58.6 billion.

The export-to-import coverage ratio declined by 1.7 percentage points to 77.7%.

Excluding energy and gold trade, the export-to-import coverage ratio stood at 90.8% in July.

In the first seven months, exports grew 3.4% year-over-year to $161.6 billion, while imports rose 4.7% to $222.1 billion.

The January-July trade gap increased 8.2% to $60.5 billion. Total trade volume rose 4.1% to $383.7 billion.

The export-to-import coverage ratio stood at 72.8%, down from 73.6% in the same period last year.

Annualized exports reached an all-time high of $278.6 billion as of July, increasing 3.4% from the previous 12-month period, Bolat said.

Imports climbed 5% to $375.3 billion. The trade deficit rose 7.4% to $96.8 billion.

Considering that the deficit ended last year with a deficit of $92.2 billion, Bolat said the gap is “under control.”

“Despite all the wars in our region – to the north, east, and south – and the negative impacts on energy and raw materials, price increases, and rising costs in freight, insurance, and transportation, our trade deficit has increased by only $4.4 billion over the past year,” he noted.

Compared to December, there was an increase of $4.55 billion.

“This is a tolerable situation,” said Bolat. “The trade deficit remains under control and continues to show a stable trend.”

Türkiye’s services exports are estimated to have reached $122.6 billion on an annualized basis as of July, he added.

That would lift the annualized exports of goods and services to over $401 billion. Last month, the figure was $400.3 billion.

“This is also a record,” said Bolat. In other words, three record figures were achieved in July.”

The annualized foreign trade volume increased 4.3% to $653.9 billion, while the export-to-import coverage ratio fell to 74.2% from 75.3%.

The data showed Germany was Türkiye’s largest export destination in July, receiving $2 billion worth of goods, followed by the U.S. with $1.7 billion and the U.K. with $1.3 billion.

By broad economic category, exports of intermediate goods totaled $13.3 billion, while consumer goods exports amounted to $7.9 billion and capital goods exports stood at $3.7 billion.

Manufacturing accounted for $24.2 billion of total exports, while agriculture, forestry and fisheries contributed $800 million and mining and quarrying generated $500 million.

Bolat said the euro/dollar exchange rate had worked against exporters in July.

“While it was 1.18 last year, this month’s average of 1.14 resulted in a loss of $300 million for us,” he said.

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Tokyo and Washington conducted a coordinated yen-buying intervention and will not hesitate to take further action, Japan’s Finance Ministry said on Monday, confirming a rare bilateral move to halt the yen’s slide to fresh 40-year lows.

The move underscored both countries’ resolve to prevent a selloff in the yen and Japanese government bonds (JGBs) from causing global spillovers, such as adding upward pressure on already rising U.S. Treasury yields, analysts said.

The joint intervention was the first since 2011’s coordinated action to weaken the yen following the devastating earthquake in eastern Japan.

President Donald Trump said on Sunday the ⁠United States was helping Japan prop up the yen as a sign of friendship and to help the world economy.

In the statement, Japan’s Finance Ministry said Friday’s yen-buying intervention with the U.S. Treasury Department “countered excessive volatility and disorderly movements in the Japanese yen in recent months.”

“We will not hesitate conducting further coordinated intervention,” Finance Minister Satsuki Katayama told reporters on Monday.

The yen surged more than 1% to 155.20 per dollar after the announcement, its strongest since early May and well off the 40-year low near 164 hit last month, as traders remained on alert for more intervention.

The joint effort to fight off speculative bets against the yen followed months of preparation by the two nations and a rare and public alignment of interests in Washington and Tokyo over exchange rates.

While unilateral efforts by Japanese authorities to stop sharp yen selling in the past have failed to provide a firm floor for the currency, U.S. Treasury Secretary Scott Bessent’s verbal support for a stronger yen has given bureaucrats in Tokyo a new tool in their fight this year.

For Japan, a weak yen has fanned import prices, creating cost-of-living headaches for successive governments, including current Prime Minister Sanae Takaichi’s.

For the U.S., a weak yen blunts the trade advantage from Trump’s flagship tariffs while a related sell-off in Japanese government bonds could spill over to U.S. Treasury yields.

The shared currency anxiety has forged increasingly cozy bilateral conversations about exchange rates, historically a diplomatically thorny topic for the two economic powers, but also added new pressure for the Bank of Japan (BOJ) to persist with rate hikes.

U.S. participation in yen-buying intervention was considered as early as January, when the New York Federal Reserve made rare rate checks to help Tokyo combat yen declines, a Japanese government official with knowledge of the preparations told Reuters.

“Including online meetings, we’ve held talks about 10 times for discussions that included exchange rates,” Japanese Finance Minister Satsuki Katayama said on Monday on how frequently she spoke with Bessent.

“When he visited Japan in May, we talked three-and-a-half hours, including over dinner,” Katayama said upon announcing the joint intervention.

The May talks followed Japan’s huge yen-buying ⁠intervention between late April and early May, which failed to reverse the currency’s downtrend.

Before Friday’s move, Japan may have sold as much as $58.97 billion to buy yen when it intervened in New York markets on Thursday, BOJ data suggested.

In a sign negotiations were intensifying, Katayama said after the May meeting the two have been “coordinating very closely on foreign exchange and will continue to do so.”

Bessent, too, said Japan’s fundamentals are “strong and resilient, and that will be reflected in the exchange rate.”

He also repeated his calls for faster BOJ interest rate increases, signaling Washington’s concern its slow pace of hikes could leave the central bank behind the curve in addressing inflation.

A month later, the BOJ raised interest rates to a 31-year high of 1% in a landmark step in policy normalization. But with Japan’s real borrowing costs deeply negative, the move failed to give a lasting boost to the sagging currency.

‘Let’s congregate tomorrow’

With the yen hitting a four-decade low this year, Japan’s top currency diplomat Atsushi Mimura has shifted tactics.

Instead of a daily stream of calibrated verbal warnings against speculators, Mimura has focused on working behind-the-scenes with U.S. counterparts, said two sources familiar with the preparations.

That means Mimura, who has sway over when to step in, has been less public, and kept markets guessing about the chance of intervention. He kept a low profile even as Katayama and Bessent held an online meeting in late June to discuss financial market developments.

“The joint intervention is the culmination of Japan’s alliance with the United States,” Mimura told reporters on Monday.

The need for action heightened in July, when concern over Takaichi’s expansionary fiscal and monetary stance drove the yen to recent lows, pushing up the cost of imports and hurting the administration’s approval ratings.

The U.S. administration was also grappling with rising inflation and Treasury yields, heightening the incentive to support Tokyo’s effort to combat market headwinds.

Nodding to Japan’s concern over the weak yen, the U.S. Treasury’s semi-annual currency report on July 24 echoed ⁠Tokyo’s warning against excessive yen volatility and pledged to continue “close consultations” with Japan on exchange-rate matters.

Both the U.S. Federal Reserve’s and BOJ’s policy meetings last week were seen as potentially vulnerable windows for the yen, as investors positioned themselves based on cues from both banks about the timing of future rate hikes.

Japan’s intervention campaign was closely coordinated with the BOJ, according to people familiar with the matter.

Using a speakerphone connected with a handful of staff at the Finance Ministry’s foreign-exchange division, Mimura gave the green light to buy yen for dollars late evening on July 30.

The move, which hit investors outside Tokyo hours and amid the BOJ’s two-day policy meeting, immediately firmed the yen to 157.80 per dollar from around 162.80.

When one of the staff told Mimura the yen was sliding back down toward 158, he said. “Yes. Let’s congregate tomorrow.”

Shortly after BOJ Governor Kazuo Ueda’s news briefing concluded on Friday, the yen spiked in what markets suspect may have been another bout of yen-buying ⁠intervention by Tokyo.

This time, Tokyo was joined by Washington.

The U.S. Treasury informed a number of banks that it might intervene in the yen market and that they should “stand ready for future action,” a source had told Reuters.

Bessent had a notepad at a Friday cabinet meeting with the words “To Do,” followed by “Buy Japanese Yen (JPY) $5-10 bill,” a Reuters photo showed.

A September rate hike?

The BOJ’s communication on its future rate plans last week was its most hawkish to date and crucially nodded to a line in the U.S. Treasury’s currency report that “monetary normalization would help reduce excessive exchange rate volatility.”

Carefully reading off a prepared script, Ueda emphasized the vigilance needed “more than ever” against upside price risks, ⁠read by analysts as all but confirming a September rate hike.

Those sentiments also received praise in Washington.

“We strongly support Japan’s decisive market and monetary steps to correct the substantial undervaluation of the yen,” Bessent said in an X post on Sunday, stressing anew his support for higher BOJ rates.

Mimura, too, said the government will align its currency policy with the BOJ’s monetary policy to address yen weakness, signaling the chance of a near-term rate hike.

In a separate X post, Bessent said he would meet Ueda at a U.S.-hosted G-20 finance leaders’ meeting in end-August – which precedes the BOJ’s next ⁠policy meeting on Sept. 17 and 18.

Markets now see the BOJ’s September meeting as live.

“Given Japan moved to prevent yen falls with the cooperation of the U.S., there’s a question of whether the BOJ can afford to forgo raising rates in September,” said Yuki Kimura, bond strategist at Okasan Securities.

Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities, sees a September hike as near-given.

“Intervention only has a temporary effect in slowing currency moves. Faster rate hikes are probably needed to put a lasting floor on the yen,” she said.

“I feel like a September rate hike is a done deal. It won’t make sense for the BOJ to wait until October and cause another bout of yen declines.”

Doubts

In a sign of further Japan-U.S. coordination, Bessent said the ⁠U.S. would consider increasing in coming months the size of the Federal Reserve’s repurchase facility providing temporary dollar liquidity, calling the tool an “important backstop.”

The comment ⁠followed the Finance Ministry’s rare X post on Saturday that it had “a broad range of tools to address market liquidity needs,” including access to the Fed’s repurchase facility providing temporary dollar liquidity.

The Fed facility, introduced in 2020 to steady markets during the COVID-19 pandemic, allows Japan to raise dollar liquidity without outright sales of U.S. Treasuries, potentially easing funding pressures ⁠on Tokyo for intervention.

Some analysts doubt whether the latest round of action could counter structural factors driving down ⁠the yen, such as the rising cost of fuel from the Middle East conflict and the still wide Japan-U.S. interest rate differentials.

“The announcement effect of ⁠joint intervention is much bigger than solo action by Japan,” said Tsuyoshi Ueno, a senior economist at NLI Research Institute.

“But the fundamentals driving yen weakness haven’t changed, so we likely won’t see one-sided yen rises from this intervention.”

China’s Alibaba on Monday introduced its largest and most capable AI model to date, sending its shares higher, while a research firm reported that DeepSeek’s newest product features pricing more than 100 times cheaper than Anthropic’s Claude Fable 5.

The two developments highlight the rapid pace of advancement in artificial intelligence by Chinese tech firms, which are locked in a fierce and fast-moving battle to build more powerful systems ​without making them prohibitively expensive to run.

Both models – Alibaba’s Qwen3.8-Max and DeepSeek’s V4-Flash – underline ​Chinese ⁠commitment to open-weight models as the firms seek to gain traction among developers globally.

“Chinese AI companies have found an important market. Many business workflows do not need the industry’s very best model,” said Lian Jye Su, chief analyst at research firm Omdia.

“They need models that are good enough, affordable, transparent and accessible, and open-weight models help meet that demand.”

With an open-weight model, the underlying learned settings that allow developers to run or adapt the system are available for download. By contrast, OpenAI, Anthropic and Google have closed-source models.

Trillions of parameters

Alibaba’s new Qwen3.8-Max immediately shot up leaderboards assessing the capabilities of AI models after being unveiled on Monday, helping its shares jump 7% in Hong Kong trade.

The model has 2.4 trillion parameters, the numerical settings a model learns from data and uses to recognize patterns, generate answers, and carry out tasks. That puts it not too far behind domestic rival Moonshot AI’s ⁠Kimi ⁠K3, which was launched last month and has 2.8 trillion parameters.

A higher parameter figure does not automatically make a model better, but it has become a closely watched measure of the scale of the computing and data behind advanced AI systems.

Qwen3.8-Max was unveiled on crowdsourced, model-comparison platform Arena.AI. It soon became the highest-ranking Chinese model in terms of text models, though it still lags Claude Fable 5 and three Opus variants, which are all from Anthropic.

On Arena.AI’s leaderboard for AI models that analyse images and other visual material, Qwen3.8-Max ranked second globally, only behind a Claude Fable 5 variant.

Both Qwen3.8-Max and Kimi K3 can handle text, images and video, and process up to 1 million tokens at a time.

Tokens are chunks of ⁠data, often parts of words or short words, and a big figure means the model can take in large amounts of material in one go, such as long legal files, a large software codebase or hundreds of pages of documents.

The tech giant said the model, due to be released ​next week, completed a software-engineering project in 16 days. It uses a “mixture-of-experts” design, which divides work among specialized parts of the system ​instead of switching on the entire model for every request. Only 95 billion parameters are used at a time, reducing costs and response delays.

Ultra-cheap DeepSeek

DeepSeek’s V4-Flash model, released on Friday, is by far the least expensive to ⁠run on benchmark ‌tests among ‌well-known models globally, according to research firm Artificial Analysis.

The startup, which sources have said is ⁠preparing for a potential IPO, saw its R1 and V3 models become a ‌global sensation in early 2025, triggering a sell-off in global tech stocks and raising questions about the large amounts U.S. companies were spending on AI.

V4-Flash charges $0.14 per ​million input tokens and $0.28 per million output tokens, ⁠according to San Francisco-based Artificial Analysis.

Artificial Analysis estimated V4-Flash’s average cost at 3 cents per test, compared ⁠with 86 cents for Kimi K3, $1.86 for OpenAI’s GPT-5.6 Sol and $3.15 for Claude Fable 5.

The comparison provides a more realistic ⁠measure of value than pricing alone ​because it accounts for the amount of data a model must process and generate to complete a task. A model with a low headline price can still prove expensive if it requires significantly more steps to produce an answer.

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Annual consumer price inflation in Türkiye cooled to 31.75% in July, according to official data released Monday.

The rate slowed from 32.11% in June, the Turkish Statistical Institute (TurkStat) said.

On a monthly basis, consumer prices increased 1.78%, accelerating from a 0.99% rise in June.

Both figures came slightly below market expectations.

An Anadolu Agency (AA) survey had forecast an annual inflation of 31.8% and a monthly increase of 1.82%.

The consumer price index rose 19.86% compared with December 2025, while the 12-month moving average increase stood at 31.90%.

Among the three expenditure groups with the largest weights, annual prices increased 40.32% for housing, water, electricity, gas and other fuels, 37.53% for food and non-alcoholic beverages, and 30.83% for transportation.

Food and non-alcoholic beverages contributed 8.94 percentage points to the annual inflation rate, transportation 5.22 points, and housing 5.21 points.

On a monthly basis, transportation prices rose 2.59%, housing costs increased 2.25%, and food and non-alcoholic beverage prices climbed 1.61%.

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