Leading indicators imply that inflation could remain lower than projected this month as a favorable course in food prices continues, the Turkish central bank said on Thursday.

In the minutes of last week's policy-setting meeting, where it cut its key policy rate by 150 basis points to 38%, the bank said underlying inflation indicators were expected to maintain their downward trend in December.

The annual inflation rate cooled to 31.1% in November, while month-over-month prices advanced 0.87%, both below expectations. The reading marked the lowest level seen since late 2021.

"Leading indicators signal that the favorable course in food prices continued from November into December," the Central Bank of the Republic of Türkiye (CBRT) said on Thursday in the summary of last week's meeting.

"On the unprocessed food front, prices of fresh fruits and vegetables have decreased, while the rise in red meat prices partly limits this favorable course," it added, suggesting also that the "gradual slowdown in monthly processed food inflation continues."

It also suggested that the energy prices are relatively stable, linking it to the correction in fuel prices.

"Leading indicators suggest milder price increases in the core goods and services groups in December compared to the previous month," the bank said.

"Underlying inflation indicators are also expected to maintain their downward trend in December. Against this backdrop, leading indicators imply that inflation will remain lower than projected this month."

Last week, the bank cut rates, citing that inflation expectations and pricing behavior are "showing signs of improvement" even as they continue to pose risks to the disinflation process.

The central bank's year-end interim inflation target stands at 24%, with a forecast range of 31%-33%. It expects inflation to fall to its 16% interim target by the end of 2026, in line with the government's medium-term program. For next year, the bank projects inflation between 13% and 19%.