Usman Salis
Turkey's monetary situation is sending a clear signal: the country's money supply is growing far faster than inflation targets require, and the gap is not closing. As of January 2026, M3 money supply is expanding at 39.9% per year while consumer price inflation sits at 31.5%. The numbers suggest that the underlying monetary pressure driving Turkey's inflation has not gone away.
39.9% Growth vs. a 23.4% Benchmark: A Persistent Gap
Economist Steve Hanke has identified Turkey's so-called "Golden Growth Rate" at 23.4% per year. This is the pace of monetary expansion considered consistent with hitting the country's interim inflation target of roughly 16% annually. The current M3 reading of 39.9% sits well above that threshold. Turkey's inflation has already ranked among the highest in the G-20, and the latest data reinforces why.
Looking back, the trajectory has been dramatic. Between late 2020 and 2021, annual money supply growth ran in the 20% range.
The current pace of monetary expansion significantly exceeds what I describe as the Golden Growth Rate.
Then in 2022, it exploded past 80% before slowly retreating. Despite moderation through 2023, 2024, and into 2025, M3 growth has remained persistently elevated. The line on the chart never really came down to where it needs to be.
Money Supply as a Driver of Turkey's Inflation Outlook
The relationship between money supply and inflation is one of the more durable ideas in macroeconomics. When liquidity grows at a pace well above what the real economy can absorb, prices tend to follow. Turkey's case fits that pattern. India's M3 at 12.29% with inflation at 2.75% offers a stark contrast - tighter monetary growth, lower price pressure. Similarly, Egypt's inflation at 11.9% alongside M2 growth of 18.7% reflects a comparable dynamic playing out in another emerging market.
For Turkey, the challenge is straightforward to describe but harder to solve. With M3 at 39.9% and CPI at 31.5%, the spread between monetary expansion and actual inflation still leaves room for further price pressure. Until money supply growth comes closer to the 23.4% Golden Growth Rate benchmark, Turkey's path to its 16% inflation target will remain steep.
Usman Salis
