ISTANBUL (Reuters) -Turkey’s three big state banks cut interest rates on Monday on an array of loans by up to 200 basis points, following a surprisingly sharp policy easing by the central bank last week. Ziraat Bank, Halkbank and Vakif Bank announced their moves in a joint statement, confirming a Reuters report on Sunday. The rate cuts set the stage for cheaper commercial, individual and mortgage loans, even as inflation has risen to near 20%, well above an official 5% target. “As they have done until now, our banks will continue to stand beside our customers and companies, contributing to the strengthening of our country’s economy and employment,” the lenders said, adding rates would depend on products and maturities. Citing three sources familiar with the plan, Reuters reported on Sunday that the state banks were expected on Monday to cut borrowing costs by some 200 basis points. Analysts said the move could support some borrowers but also exacerbate pressure on the lira and the economy, given that Turkey’s benchmark bond yields shot up after the central bank slashed its policy rate by 200 points to 16% last week. State banks aggressively expanded credit last year to ease pandemic fallout. Economists said the stimulus stoked inflation and prompted the monetary tightening cycle that began in September of 2020. Public lenders’ loan growth has been muted this year and Turkish President Tayyip Erdogan has publicly called for lower interest rates in order to boost credit and the economy. The central bank, predicting that inflation pressure is temporary, began cutting rates last month, initially by 100 points, sending the lira to a series of all-time lows. STIMULUS RISKS Some private lenders say they are hesitant to boost credit given the risks of stoking an economy expected to grow at nearly 10% this year, and possible defaults on companies’ foreign currency debt. The chief executive of private lender Isbank, Hakan Aran, said in a televised interview on Sept. 29 that credit costs will not fall unless inflation is brought down first. In their statement on Monday, the state banks said rates will be set at a monthly 1.29% for housing loans below 1 million lira ($104,000), and 1.34% for loans above 1 million lira as of Tuesday. Citing a document and a separate banking source, Reuters reported earlier on Monday that Halkbank lowered rates on corporate and commercial loans to a range of 15.5% to 16.5%. Central bank data on both public and private lenders shows that average rates on commercial loans held close to 20% through most of this year. One of the sources said they had been between 17.5% and 18% at state banks earlier last week. Reporting by Ebru Tuncay and Jonathan Spicer; Additional reporting by Nevzat Devranoglu;Editing by Daren Butler and Susan Fenton