ANKARA, Turkey — On Thursday, Turkey’s central bank announced a reduction in its key interest rate by 2.5 percentage points, bringing it down to 47.5%. This marks the first decrease in nearly two years as the bank seeks to tackle the nation’s rampant inflation.

The Monetary Policy Committee of the bank attributed the decision to signs of slowing inflation, stating that the one-week repo rate will be lowered from 50% to 47.5%. In their statement, they highlighted that the overall inflation trend appeared “flat” for November, and early indications suggest a potential decline in December. Moreover, they noted that diminishing demand within the country has contributed to easing inflationary pressures.

Turkey has faced a significant surge in inflation in recent years, primarily due to dwindling foreign reserves and President Recep Tayyip Erdo?an’s unorthodox approach to economics, which previously advocated for lower interest rates as a method to control inflation— a stance he later retracted.

Inflation rate was recorded at 47% for November, a decrease from its peak of 85% in late 2022. However, many independent economists argue that the actual inflation rate is considerably higher than the official estimates.

While the general consensus among economists is that elevated interest rates are effective in controlling inflation, President Erdo?an had previously dismissed central bank governors who did not conform to his rate-cutting ideology.

Since adopting more traditional economic policies under a new team, the central bank raised rates from 8.5% to 50% between May 2023 and March 2024, maintaining that level until this latest adjustment. The continuing high inflation rates have left numerous households struggling to meet their fundamental needs, particularly concerning essential items like food and housing.