## Services Inflation and the Exchange Rate in Türkiye

_IMF Working Papers, January 16, 2026_

## Source details

**Canonical URL:** [Services Inflation and the Exchange Rate in Türkiye](https://www.imf.org/en/publications/wp/issues/2026/01/16/services-inflation-and-the-exchange-rate-in-trkiye-573276)

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## Bibliographic details
- Authors: Tara Iyer, Agustin Roitman, James P Walsh
- Published: January 16, 2026
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229036955.001

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### Summary
- Inflation in Türkiye has been high since 2021.
- The paper investigates sources of this inflation and the impact of mitigating exchange rate volatility.
- Two main findings emerge:
  - Significant divergence in inflation dynamics across CPI components since late 2021—services inflation has exhibited more inertia than goods inflation, a result that stands out in both historical and cross-country contexts.
  - Exchange rate shocks are estimated to have a smaller impact on services inflation than on goods inflation; the peak services inflation response to a nominal exchange rate shock is estimated to be fairly muted, at just one-tenth the size of the shock.
- Since mid-2023, there has been an unusually sharp rise in the relative price of services, as goods inflation has been more sensitive to exchange rate movements.
- When inflation persistence—especially in services—is relatively high, inflation stabilization may require complementary policies to break inertia beyond a stable currency.

### Key findings and statistics
- Divergence in CPI component dynamics emerged since late 2021.
- Services inflation exhibits greater inertia than goods inflation; persistence is generally broad-based.
- Rental services play an important role in services inflation persistence.
- Peak services inflation response to a nominal exchange rate shock: one-tenth the size of the shock.
- Noted period of behavior: since mid-2023, unusually sharp rise in the relative price of services.

### Analysis of exchange rate effects
- Exchange rate shocks have a smaller estimated impact on services inflation relative to goods inflation.
- Goods inflation is more sensitive to exchange rate movements, explaining the relative price shift toward services since mid-2023.
- The muted peak response of services inflation to nominal exchange rate shocks underscores sectoral heterogeneity in pass-through.

### Policy implications and recommendations
- Stabilizing the currency alone may be insufficient when services inflation persistence is high.
- Complementary policies are likely needed to break inertia in services inflation, including measures targeting rental services where relevant.
- Policies should account for the differential pass-through of exchange rate shocks across CPI components.

### Subjects and keywords
- Subjects: Exchange rate adjustments, Exchange rate pass-through, Exchange rates, Foreign exchange, Inflation, Inflation persistence, Nominal effective exchange rate, Prices
- Keywords: Exchange rate adjustments, Exchange Rate Pass-Through, Exchange rates, Global, goods inflation, IMF working papers, Inflation, Inflation Inertia, Inflation persistence, inflation response, inflation stabilization, Nominal effective exchange rate, Services Inflation, Türkiye, VAR

*Tara Iyer, Agustin Roitman, and James P Walsh. "Services Inflation and the Exchange Rate in Türkiye", IMF Working Papers 2026, 006 (2026), accessed 9/8/2026, https://doi.org/10.5089/9798229036955.001*

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- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2026/01/16/services-inflation-and-the-exchange-rate-in-trkiye-573276_