Turkish Central Bank Cuts Key Rates Sharply For Second Time

(RTTNews) - Turkey's central bank slashed its key interest rates for the second straight meeting on Thursday citing slowdown in the underlying trend of inflation.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey, headed by Yasar Fatih Karahan, decided to reduce the policy rate to 40.5 percent from 43.0 percent.

Previously, the bank had reduced the rate by 300 basis points in July.

The committee also lowered the central bank overnight lending rate and the overnight borrowing rate by 250 basis points each to 43.5 percent and 39 percent, respectively. In August, consumer price inflation slowed to 32.95 percent, the lowest since November 2021.

"The tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate, and expectation channels," the bank said.

Although GDP growth was above projections in the second quarter, final domestic demand remained weak, the MPC noted. Data suggested that demand conditions are at disinflationary levels.

Policymakers observed that food prices and service items with high inertia are exerting upward pressure on inflation. Inflation expectations, pricing behavior, and global developments continue to pose risks to the disinflation process.

"The Committee will make its policy decisions so as to create the monetary and financial conditions necessary to reach the 5 percent inflation target in the medium term," the bank added.