The Central Bank of the Republic of Türkiye (CBRT) published an account of its Oct. 22 monetary policy meeting, detailing the reduction of its policy rate from 37% to 36% against a backdrop of weak domestic demand and slowing underlying inflation. The overnight lending and borrowing rates were also lowered by 1 percentage point, to 39% and 34.5%, respectively. Elevated energy prices and inflation expectations remain risks to disinflation. Annual consumer inflation fell to 29.73% in September, while prices rose 1.84% during the month. Underlying inflation slowed from 2.2% in the second quarter to 1.8% in the third. September’s improvement partly reflected a change in the timing of university tuition increases, which were spread across August and September rather than concentrated in September as in the previous year. Higher food and energy prices are expected to raise monthly headline inflation in October, although the effect on the underlying inflation trend is expected to be limited. Changes already made to the reserve requirement framework raised the eight-week growth limit for small and medium-sized enterprise loans from 4.5% to 5% and revised exemptions from growth limits for general-purpose and foreign currency loans. The ratios of Turkish lira required reserves maintained in blocked accounts were also lowered. Future policy rate decisions will depend on realized and expected inflation and its underlying trend. A significant and persistent deterioration in the inflation outlook would trigger monetary tightening.

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