by Burak Akinci

ANKARA, Sept. 11 (Xinhua) -- Trkiye's central bank cut interest rates on Thursday to boost investment and growth as inflation eases, but experts warn that persistent price pressures are leaving policymakers with a delicate balancing act.

The Monetary Policy Committee (MPC) of the central bank lowered its one-week repo rate by 2.5 percentage points to 40.5 from 43 percent, delivering a second consecutive cut since July.

"The underlying trend of inflation slowed down in August. Recent data indicate that demand conditions are at disinflationary levels," the MPC said in a statement.

The bank's decision came days after fresh inflation data signaled that the path toward price stability remains challenging.

According to the Turkish Statistical Institute, the monthly rise in consumer prices in August is 2.04 percent, above expectations, while annual inflation eased modestly to 32.95 percent from 33.52 percent in July.

The recent figures raised concerns about the sustainability of the disinflation trend, with high food and housing costs, Istanbul-based economist Atilla Yesilada, told Xinhua.

"Annual inflation seems to be moving in the right direction, but the stickiness of monthly prices is concerning," he said.

"This complicates the central bank's task, because markets will want reassurance that cutting rates doesn't mean abandoning the inflation fight," Yesilada pointed out.

In its statement, the MPC acknowledged that "food prices and service items with high inertia are exerting upward pressure on inflation." However, it also hinted that further rate cuts are possible, pledging to act "on a meeting-by-meeting basis with a focus on the inflation outlook."

Inflation remains a highly sensitive issue for Turkish households and investors, after years of elevated price pressures have eroded purchasing power, especially for pensioners and low-income citizens.

"Lower borrowing costs are a clear incentive for businesses and households," said Mustafa Sonmez, an Istanbul-based economist.

"But the risk is that if consumer demand rebounds too fast, it may reignite price pressures. The central bank is trying to thread a fine needle," Sonmez noted.

Economists also underlined that Trkiye's external vulnerabilities add to the complexity. The country relies heavily on foreign inflows to finance its current account deficit, meaning investor confidence in the central bank's inflation strategy is crucial.

For businesses, the immediate benefit lies in reduced financing costs. Industrial producers and manufacturers, especially in export-driven sectors, have been calling for months for lower rates to ease credit burdens and maintain competitiveness.

The government has emphasized the importance of sustaining export growth and tourism revenues to stabilize the external balance and strengthen foreign currency reserves.

Still, Yesilada warned that inflationary expectations remain fragile. "If households start to believe that inflation is no longer under control, it can quickly become a significant problem," he warned.

In April, the central bank increased interest rates after the Turkish lira experienced fluctuations.

In Sonmez's view, Thursday's rate cut aligns with Ankara's broader growth-first policy stance, which seeks to bolster investment, employment, and industrial expansion. Trkiye's economy expanded by 4.8 percent year-on-year in the second quarter, above expectations, much to the satisfaction of policymakers.

Sonmez noted, however, that persistent inflation continues to burden Turkish households, who have faced high living costs for years.

"People still see food prices climbing, rents remaining high, and energy bills rising. For them, the official annual inflation figure is less relevant than what they feel day to day," he commented.

The government has introduced measures such as targeted subsidies and credit schemes to ease the cost-of-living strain, but economists say structural reforms are needed to fully anchor inflation expectations.

Yesilada stressed that credibility remains the cornerstone. "If the central bank can convince markets that it is cutting rates from a position of strength, the strategy will work. But if inflation surprises on the upside, they will need to pause," he added.