As expected, the bank cut the highest of the multiple interest rates it uses to set policy to 8.5 percent. It left its benchmark one-week repo rate unchanged at 7.5 percent. Fifteen of 17 economists in a Reuters survey forecast a 25 basis point cut in the overnight rate, while two expected a cut of 50 basis points.

President Tayyip Erdogan, who wants stronger consumption-led growth, has made repeated calls for cheaper credit. He told commercial lenders this month they should not be charging high interest rates in the aftermath of a failed coup and promised action against those who "go the wrong way".

The attempted putsch on July 15 and its aftermath have increased uncertainty. Ratings agency Fitch lowered its outlook to negative from stable on Friday, while Moody's said on July 18 it was putting Turkey's credit rating on review for a possible downgrade to junk status. (Reporting by Daren Butler, Humeyra Pamuk and; Writing by Nick Tattersall; editing by John Stonestreet)