(Adds details, background)
ANKARA, Jan 9 (Reuters) - Turkey's Central Bank sees the opportunity to cut interest rates and Turkey's medium and long-term inflation targets can be met, said Central Bank Governor Durmus Yilmaz on Friday.
He added, however, that the bank cannot ignore price stability even during economic contraction.
"We are applying the necessary policy. We are saying that we see the possibility to cut rates and we are cutting them," Yilmaz said in a televised interview with broadcaster CNN Turk.
The central bank has cut rates twice in consecutive meetings by a total of 175 basis points, the last cut in a surprise 125 basis-point move after growth in the third quarter fell to a six-year low.
The current global economic crisis has bit into Turkey's economy, and the business community has stepped up its calls for a new deal with the International Monetary Fund after the previous $10 billion agreement ran out last May.
An IMF mission is currently in Ankara to discuss the terms of a new deal.
Yilmaz said he would not comment on the sum of a possible agreement with the international lender, but said that a new deal would bring about needed fiscal discipline.
"If Turkey had not signed the last two deals with the IMF it would not be where it is today. The IMF could provide us with some discipline, which could be seen as necessary," he said.
He also said the worst of the current economic crisis has not yet been seen and Turkey should be ready for surprises in the first half of this year.
Yilmaz said that unlike the U.S. Federal Reserve, the Turkish central bank's balance sheets are growing at a measured rate as the bank is not setting up any major rescue plans.
(Editing by Ron Askew)