Turkey’s Central Bank Delivers Larger-Than-Expected Rate Cut as Inflation Eases

TDT | ANKARA

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Turkey’s central bank lowered its benchmark interest rate by 250 basis points on Thursday, bringing it down from 43 percent to 40.5 percent. The move exceeded market expectations and came as annual inflation showed further signs of easing.

The bank had previously raised its key rate to 46 percent in April following political unrest over the jailing of Istanbul’s opposition mayor, before trimming it by three percentage points in July.

According to official data released last week, annual inflation dropped to 32.95 percent in August, compared to 33.52 percent in July. The decline fuelled expectations of another rate cut, as policymakers pointed to weak domestic demand despite stronger-than-expected second-quarter growth.

“Recent data suggest that demand conditions remain disinflationary, although food and service prices continue to keep upward pressure on inflation,” the central bank said in its statement.

It also warned that inflation expectations, pricing behavior, and global economic developments still pose risks to the disinflation process. The bank pledged to maintain a tight monetary policy stance until price stability is secured.