The Central Bank of the Republic of Türkiye (CBRT) on Thursday lowered its key policy rate by 150 basis points to 10.5%.
Geopolitical risks on the global economy are increasing and recession expectations are getting stronger on a global scale, the bank said in a press release.
"Increase in inflation is driven by the lagged and indirect effects of rising energy costs resulting from geopolitical developments, effects of pricing formations that are not supported by economic fundamentals, strong negative supply shocks caused by the rise in global energy, food and agricultural commodity prices," it said.
The bank added: "The committee expects the disinflation process to start on the back of measures taken and decisively implemented for strengthening sustainable price and financial stability along with the resolution of the ongoing regional conflict."
The annual inflation rate in Türkiye was at 83.45% in September.
The bank said it plans to end the cut cycle after another rate cut in the next meeting.
In the previous monetary policy meeting last month, the bank lowered the policy rate by 100 basis points to 12%.
Türkiye's monetary policymakers are bucking the global trend of central banks raising interest rates to combat inflation, as high borrowing rates cool down the economy and prices.
The latest interest rate cut was widely anticipated, but the 150 basis points cut was larger than expected after two 100 basis points moves in both August and September.
Liam Peach, senior emerging markets economist at the London-based Capital Economics, said this guidance "appears to be an admission that lowering interest rates is hardly the right thing to be doing when inflation is so high."
Inflation began to rise worldwide after economies emerged from COVID-19 lockdowns but it worsened this year as Russia's invasion of Ukraine sent energy and food prices through the roof.
Erdoğan, a vocal opponent of higher borrowing costs, has called high interest rates his "biggest enemy."
Earlier this month he vowed that while he remained in power, "the interest will continue to come down with each passing day, each passing week, each passing month."
