By EMRE PEKER and YELIZ CANDEMIR ISTANBUL—Turkey's central bank cut Tuesday the overnight-lending rate more than expected to boost the slowing economy. The lira and bonds rose. The Monetary Policy Committee reduced overnight borrowing costs for banks to 10% from 11.5%, the bank in Ankara said in an emailed statement. Seven of 10 economists surveyed by Dow Jones Newswires expected a 1 percentage point cut, three forecast a 0.5 percentage point drop. This shows the bank is "concerned about growth," said Ozgur Altug, chief economist at BGC Partners in Istanbul. Turkey's Economy Minister Zafer Caglayan said last week it is "becoming difficult" to reach the government's goal of 4% economic growth this year. He had urged the central bank to lower rates. Annual expansion was 2.9% in the second quarter, and 3.3% in the first. The country had the third-fastest growth of the world's biggest economies last year, 8.5%, trailing China and Argentina. As expected, the central bank kept its one-week repo rate of 5.75% and a borrowing rate of 5%. The lira reversed losses against the dollar to trade at 1.761 lira at 0907 ET from 1.803 before the central bank's decision. Bond yields dropped to 7.18% from 7.2% before decision. The central bank has been lowering borrowing costs for banks under its interest rate corridor which is set daily, now between 5.75% and 10%, as a result of today's rate decision. The effective cost of funding dropped to 6.1% on Tuesday, the lowest since November and down from 10.2% in June. "I find the central bank's step to be correct and appropriate. There could have been a cut slightly earlier," Economy Minister Caglayan said in a statement. "Turkey needs growth."

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