Turkey's Central Bank on Thursday cut its benchmark interest rate by 50 basis points to 4.5 percent in a bid to stimulate the economy, after a reduction in the rate in April.
The bank also cut its overnight borrowing rate from 4 to 3.5 percent, and lending rate from 7 to 6.5 percent.
It meanwhile increased the foreign exchange reserve coefficients for banks that hold over 30 percent of their reserves in foreign exchange.
"The committee indicated that, in order to balance the risks on financial stability, the proper policy would be to keep interest rates low while increasing foreign currency reserves via macro prudential measures," the bank's monetary policy committee said in a statement.
"Capital inflows remain strong and credit growth hovers above the reference rate," said the statement.
Turkey's economic growth slowed to 2.6 percent in 2012, from 8. 5 percent in 2011. But the central bank predicts a 4-percent growth for 2013.