Turkish central bank cut the benchmark one-week repo rate by 50 basis points to 7.75% citing slowing inflation, pushing the Turkish lira 0.8% higher against the greenback.
The TCMB had hiked the key rate to 10% from below 5% in January last year before cutting it to 8.25% in July.
Inflation rate in Turkey had fallen to a nine-month low of 8.17% in December, from 9.15% in the previous month, creating the downside room for policy rate.
In the third quarter of last year, Turkish economy advanced 0.4% on quarter in the three months to September, following a 0.5% contraction in the previous period.
But the annual GDP growth had fallen sharply to 1.7% from 4.8% in the first quarter. It was its lowest since the Q4-2013 reading.
The Turkish lira made some gains on the rate cut, which improved business sentiment in the country. However, the currency is still holding not far away from the multi-year lows hit in December.
The USD/TRY pair fell to a low of 2.3237 after the TCMB rate announcement from near 2.3440 prior. The multi-year peak the pair hit in December is 2.4130, which is now 3.8% away.