Türkiye Slashes Interest Rate by 100 Basis Points as Disinflation Slows

The Turkish Central Bank reduced its benchmark interest rate by 100 basis points on Thursday, aligning with market expectations.

The benchmark one-week repo rate was lowered from 40.5% to 39.5%, The Caspian Post reports, citing Turkish media.

The bank said the underlying trend of inflation increased in September, and while recent data showed that demand conditions were at disinflationary levels, they also pointed to a slowdown in the disinflation process.

"The risks posed by recent price developments, particularly in food, to the disinflation process through inflation expectations and pricing behavior have become more pronounced," the Central Bank said in a statement.

"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," it said.

The bank added that it will guarantee the tightness needed by the projected disinflation path in accordance with the interim targets by determining the policy rate by considering realized and expected inflation as well as its underlying trend.

"The (Monetary Policy) Committee will make its policy decisions so as to create the monetary and financial conditions necessary to reach the 5% inflation target in the medium term," it said.