by Burak Akinci

ANKARA, July 24 (Xinhua) -- Türkiye's central bank on Thursday cut its policy rate by 300 basis points to 43 percent, down from 46 percent, signaling a cautious shift toward easing as inflation slows and business groups urge measures to support economic activity, analysts said.

"Recent data indicate that the disinflationary impact of demand conditions has strengthened," the bank's Monetary Policy Committee said in a statement, adding that "potential effects of the geopolitical developments and the rising trade protectionism on the disinflation process are closely monitored."

The bank also lowered its overnight lending rate from 49 percent to 46 percent and the overnight borrowing rate from 44.5 percent to 41.5 percent.

The cut was widely anticipated by financial institutions. In the weeks leading up to the decision, several international banks and domestic research houses, including JPMorgan and Morgan Stanley, had forecast that the central bank would begin easing in July, citing the steady decline in headline inflation.

Business groups, including the influential Independent Industrialists and Businessmen Association, had called for easing to begin by the third quarter, warning that continued tight policy would impact the economy.

Atilla Yesilada, an Istanbul-based economist, said the cut was warranted and timely.

"This is not a shift to loose policy; it's an adjustment to changing conditions. Inflation is slowing, real rates are highly positive, and the central bank is taking advantage of the policy space it has earned," Yesilada told Xinhua.

"They're signaling that the disinflation process has taken hold, and that policy now needs to become more responsive to economic activity, especially in the private sector," he said.

Türkiye's inflation declined to 35.05 percent in June from a peak of over 75 percent earlier in 2024, following a series of aggressive rate hikes initiated in mid-2023.

The bank also noted continued improvement in core inflation indicators and said expectations have begun to align more closely with its year-end targets.

Mustafa Sonmez, an independent economist also based in Istanbul, said Thursday's cut was broadly expected and reflects both macroeconomic realities and growing calls from business groups for relief from tight financial conditions.

"Given the direction of inflation and decrease in private consumption, this move was not surprising," he told Xinhua.

"The real cost of borrowing has been very high for months. A measured reduction in the policy rate is consistent with a more balanced policy approach," he added.

The central bank has emphasized that its future steps would be shaped by inflation dynamics, financial stability indicators, and global developments.

Economists said that while the bank is unlikely to move aggressively in the coming months, further cuts are possible if inflation continues to slow.

"Real rates remain restrictive, even after this cut," Yesilada noted. "There is space to continue easing, perhaps down to the 36-38 percent range by year-end, but only if the data supports it." ■