Ankara:Trkiye's central bank announced a reduction in its benchmark policy rate by 100 basis points to 36% on Thursday, aligning with market expectations after maintaining the rate for five consecutive meetings.

According to Anadolu Agency – English, the Monetary Policy Committee, led by Governor Fatih Karahan, decreased the one-week repo auction rate from 37%. Additionally, the overnight lending rate was reduced from 40% to 39%, and the overnight borrowing rate from 35.5% to 34.5%.

The committee noted that while there have been monthly fluctuations, recent inflation figures and leading indicators suggest a slowdown in the underlying inflation trend. Economic activity data, combined with the limited pass-through of supply shocks to domestic prices, indicates weak domestic demand. However, geopolitical tensions continue to elevate energy prices, posing an upside risk to the inflation outlook.

The central bank emphasized its commitment to a tight monetary policy stance until price stability is achieved, aiming to strengthen the disinflation process through demand, exchange rate, and expectation channels. Future rate decisions will consider realized and expected inflation to maintain necessary policy tightness and support the projected disinflation path.

In the event of a significant and persistent deterioration in the inflation outlook, the committee indicated a readiness to tighten the monetary policy stance. Additional macroprudential measures may be employed to ensure effective monetary transmission, with liquidity management tools being used as needed.