Turkey’s central bank has cut its benchmark interest rate by one percentage point, from 37% to 36%, marking its first rate reduction in nine months.
The bank announced the decision following a meeting of its Monetary Policy Committee (MPC), which sets the benchmark one-week repo auction rate.
The bank also lowered its overnight lending rate from 40% to 39% and its overnight borrowing rate from 35.5% to 34.5%.
At its previous meeting in September, the committee had kept the benchmark rate unchanged at 37%.
In a statement accompanying the decision, the central bank said recent inflation data pointed to a continued slowdown in underlying price pressures.
"Despite monthly fluctuations, recent inflation figures and leading indicators confirm the deceleration in the underlying trend of inflation," the statement said. "Data on economic activity as well as the limited pass-through of supply shocks to domestic prices indicate that domestic demand remains weak."
The committee also warned that elevated energy prices could put upward pressure on inflation. It said it was closely monitoring the effects of geopolitical developments on costs, economic activity and expectations.
Limited immediate impact expected on loan rates
The one-percentage-point reduction in the benchmark rate does not automatically translate into an equivalent decline in the interest rates banks offer customers.
Lending and deposit rates depend on several factors, including banks' funding costs, liquidity conditions, risk assessments, loan maturities and market expectations.
As a result, the decision is not expected to bring a significant immediate reduction in interest rates on consumer, auto or mortgage loans. (HA/VK)