ANKARA, Sept. 11 (Xinhua) -- Türkiye's central bank on Thursday cut its key interest rate by 250 basis points to 40.5 percent, following a slowdown in the underlying trend of inflation.

"The underlying trend of inflation slowed down in August. While GDP growth was above projections in the second quarter, final domestic demand remained weak. Recent data indicate that demand conditions are at disinflationary levels," the central bank's Monetary Policy Committee said in a statement.

However, the central bank noted that food prices and service items with high inertia are exerting upward pressure on inflation, and inflation expectations, pricing behavior, and global developments continue to pose risks to the disinflation process.

The central bank said that the tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate, and expectation channels.

The committee will determine the policy rate by taking into account realized and expected inflation and its underlying trend in a way to ensure the tightness required by the projected disinflation path in line with the interim targets, said the statement.

The step size will be reviewed prudently on a meeting-by-meeting basis, with a focus on the inflation outlook. Monetary policy stance will be tightened if inflation deviates significantly from the interim targets, it added.

Türkiye has been grappling with rising inflation for years. From June 2023 to March 2024, the central bank raised its key interest rate from 8.5 percent to 50 percent to tighten monetary policy, before entering an easing cycle at the end of last year, supported by improving inflation indicators.

The bank cut its key interest rate by 300 basis points, from 46 percent to 43 percent in July, starting a new easing cycle. Türkiye's annual inflation eased to 32.95 percent in August, marking the 15th consecutive month of decrease. ■