By Nihad Ahmed

The Turkish central bank on Thursday made a surprising move as it reduced its benchmark rate by 100 basis points to 13%, even as inflation rose again last month.

The bank was largely expected to keep its policy stance unchanged.

The annual inflation rate climbed to 79.6% in July from 78.62% in June, but the modest rise suggests it is nearing a peak, Capital Economics said.

Sharp and disorderly falls in the lira, hikes to natural gas and electricity prices, and a jump in commodity prices from the Ukraine war have pushed Turkey's inflation rate to the highest level in more than two decades.

But the bank has also blamed the increase in inflation on "effects of pricing formations that are not supported by economic fundamentals," as well as on higher energy, food and agricultural commodity prices and geopolitical developments.

This is the first time the central bank has cut its policy rate since last year after keeping it constant since December 2021 following an easing cycle.

"The Committee expects 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 bank said.

Write to Nihad Ahmed at nihad.ahmed@wsj.com

(END) Dow Jones Newswires

August 18, 2022 07:41 ET (11:41 GMT)

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