Turkish Central Bank Cuts Policy Rate to 40.5 Percent

Turkey's central bank cut its key policy rate by 250 basis points to 40.5 percent, following a 300-basis-point reduction in July, as the underlying trend of inflation continued to slow. The Monetary Policy Committee also lowered the overnight lending and borrowing rates to 43.5 percent and 39 percent, respectively, signaling a maintained tight monetary stance aimed at achieving price stability. Despite stronger-than-expected GDP growth in the second quarter, domestic demand remains weak, and inflation pressures persist from food prices and services. Inflation eased slightly to around 33 percent in August, though inflation expectations and global developments pose ongoing risks to the disinflation process. The central bank emphasized that it will adjust policy rates prudently in future meetings based on inflation outcomes and warned that monetary policy will tighten if inflation deviates significantly from targets. The government's medium-term program projects inflation to fall to 28.5 percent this year and further decline to single digits by 2027.