The Turkish central bank lowered its key policy rate by 100 basis points to 36% on Thursday, in line with expectations, having left it unchanged at the past five meetings as it monitored the impact of the U.S.-Iran war.

In a statement following its Monetary Policy Committee (MPC) meeting, the bank said it decided to bring down the benchmark rate based on recent data and indicators confirming "the deceleration in the underlying trend of inflation."

The annual inflation rate in Türkiye eased to 29.73% in September, marking the first time it has dropped below the 30% threshold in nearly five years, according to official data.

Thursday's decision also saw the central bank lowering its overnight lending rate from 40% to 39% and the overnight borrowing rate from 35.5% to 34.5%.

Prior to the 100-basis-point cut, the Central Bank of the Republic of Türkiye (CBRT) last cut interest rates in January 2026 in an effort to curb inflation and contain risks amid rising energy prices. However, it again on Thursday flagged that the elevated energy prices due to geopolitical tensions "continue to pose an upside risk to the inflation outlook."

"Despite monthly fluctuations, recent inflation figures and leading indicators confirm the deceleration in the underlying trend of inflation. Data on economic activity, as well as the limited pass-through of supply shocks to domestic prices, indicate that domestic demand remains weak," it said.

"The impact of geopolitical developments on the inflation outlook through the cost channel, economic activity and expectations is closely monitored," it added.

The CBRT also said that the tight monetary policy stance "will be maintained until price stability is achieved" and that it would strengthen the disinflation process through demand, exchange rate and expectation channels.

It also reiterated its earlier messages that the committee will determine the policy rate by taking into account realized and expected inflation and that the size and timing of policy steps will be decided prudently on a meeting-by-meeting basis with a focus on the inflation outlook.

"The committee reiterated that it remains highly attentive to upside risks on inflation," it also said.

Turkish lira was little changed, trading at 49.63 versus the dollar following the decision, after moderately easing in recent weeks.

"In case of unanticipated developments in credit and deposit markets, the monetary transmission mechanism will be supported via additional macroprudential measures," the bank said.

A broad consensus of economists expected the bank to cut rates on Thursday and foresee easing to continue by the end of the year, considering that rates were well above the current inflation readings.

The bank also pledged to continue closely monitoring liquidity conditions and to use liquidity management tools effectively.