Ankara: The Turkish Central Bank on Thursday lowered its policy rate by 100 basis points, aligning with market forecasts. The benchmark one-week repo rate was adjusted from 40.5% to 39.5%.

According to Anadolu Agency, the bank noted that while the underlying trend of inflation increased in September, recent data indicated that demand conditions were at disinflationary levels. However, there was also a noticeable slowdown in the disinflation process. The Central Bank expressed concerns over recent price developments, especially in the food sector, which have become more pronounced in affecting the disinflation process through inflation expectations and pricing behavior.

The Central Bank emphasized the importance of maintaining a tight monetary policy stance until price stability is achieved. This approach is expected to strengthen the disinflation process through demand, exchange rate, and expectation channels. The bank committed to ensuring the necessary tightness needed by the projected disinflation path, considering realized and expected inflation as well as its underlying trend.

The Monetary Policy Committee intends to make its policy decisions to establish the monetary and financial conditions necessary to achieve the 5% inflation target in the medium term. Trkiye's annual inflation rate in September rose to 33.29% from 32.95% in August, surpassing market expectations.

From May 2023 until last March, the bank raised the rate from 8.5% to 50% and maintained it until its Monetary Policy Committee meeting last December, when it lowered the rate by 250 basis points to 47.5%. The bank continued to adjust the benchmark rate at subsequent meetings, eventually bringing it down to 43% in July before further reductions in August and the latest adjustment in September to 39.5%.