Ankara: Trkiye's central bank has reduced its benchmark interest rate by 100 basis points to 37%, underscoring its commitment to managing inflation amidst fluctuating economic conditions. This move, announced on Thursday, fell short of market expectations, as many anticipated a more aggressive cut.

According to Anadolu Agency, the Central Bank of the Republic of Trkiye lowered the one-week repo rate from 38% to 37%, a decision that surprised analysts who had predicted a larger reduction based on an earlier survey. In its official statement, the bank highlighted that leading indicators pointed to a rise in monthly consumer inflation in January, primarily driven by food prices. However, it noted that the underlying inflation trend had declined in December.

The bank's statement also revealed that while demand conditions in the last quarter continue to support the disinflation process, the pace is moderating. It acknowledged that inflation expectations and pricing behaviors, although showing improvement, still pose challenges to the disinflation process.

Reiterating its commitment to a restrictive monetary policy stance, the bank emphasized that this approach is crucial for achieving price stability. It aims to support disinflation through various channels, including demand, exchange rate, and expectations.

To align with its disinflation path and interim targets, the bank stated it would set the policy rate by considering actual and expected inflation, as well as underlying trends. The Monetary Policy Committee will ensure that policy decisions create the necessary monetary and financial conditions to achieve a 5% inflation target in the medium term. The committee also assured that its decisions would remain predictable, data-driven, and transparent.