The Central Bank of Turkey on Thursday cut its key interest rate by 2.5 percentage points, from 45 percent to 42.5 percent per annum.

This decision coincided with analysts' expectations. As a result, the seven-day repo rate is at its lowest in a year.

The Turkish regulator began raising interest rates in June 2023, raising it from 8.5% to 50% in less than a year, and has kept the rate at this level for eight consecutive meetings.

The gradual decrease in interest rates was largely due to the slowdown in inflation in Turkey, Interfax reported. In February, consumer price inflation in the country was 39.05% year-on-year, compared to 44.12% in January. This is the lowest level since June 2023, and inflation has been weakening for the eighth consecutive month.

According to the Central Bank of Turkey, domestic demand is contributing to this disinflationary trend, and inflation forecasts are improving. Monetary policy will remain restrictive until the regulator achieves price stability, and further exchange rate decisions will depend on incoming statistical data.

The exchange rate of the Turkish national currency was little changed on Thursday and is 36.4362 lira/1 US dollar. Over the past twelve months, the lira has depreciated against the US currency by about 14.35%.