Consumer prices fell by 1.1 points, down from 10.9 percent in June, according to TurkStat.
Monthly inflation rose 0.15 percent in July over the previous month.
Earlier this week, Anadolu Agency’s Finance Desk’s survey of 22 economists predicted an average 0.03 percent increase in the monthly rate and an annual rate of 9.52 percent.
The economists forecast year-end inflation of 9.66 percent.
TurkStat’s report showed the highest monthly rises were in the hospitality sector as hotels, cafes and restaurants saw a 1.75 percent increase in prices.
Transport prices rose 15.24 percent, making it the main reason for annual inflation.
Commenting on the new rates, Timothy Ash, a senior emerging market strategist at London-based BlueBay Asset Management, said that although the country’s headline inflation, which includes commodities such as food and energy prices, dropped to 9.79 percent in July, the core inflation rate, which strips out volatile food and energy prices, actually rose from 9.2 percent to 9.6 percent.
"The Producer Price index (PPI) was also higher, rising to 15.45 percent, from 14.87 percent. So better than expected headline - but disappointing core/PPI," he told Anadolu Agency.
"The Turkish Central Bank this week noted that over the autumn we might see inflation spike back up, as some of the consumption tax cuts roll off, but then drop back at year's end on high base period effects," Ash said.
The core print would still suggest the central bank has little near term scope to loosen policy, he added.
Turkish Central Bank Governor Murat Cetinkaya on Tuesday stressed that inflation was likely to follow a fluctuating course in the second half and it was projected to recover starting from the last month of the year.
The Turkish Central Bank raised its end-2017 inflation forecast to 8.7 percent, Cetinkaya said during the latest monetary policy committee meeting.
Enver Erkan, analyst at KapitalFX, also noted that although inflation had dropped to single digits as expected, keeping it at that level throughout the year would be difficult.
"Most probably, inflation will remain at some level above 10 percent and will decline to single digits again in December, thanks to base effect of the previous year. We expect a year-end inflation of 9.30 percent," he said.
Erkan said that food prices seemed to go lower in July, with the help of fresh fruit and vegetables and Food Committee's short-term measures such as imports and price ceiling.
"However, red meat prices remain at high levels. Transportation prices increased by a significant percentage with the effect of higher oil prices and the rise of transportation prices in Istanbul," he added.
Erkan said the analysts expected the monetary policy of the Central Bank to be tight in the upcoming months of the year.
"If the structural adjustments have a significant effect on inflation, Turkey's Central Bank would consider the opportunities of a looser monetary policy, by first loosening the liquidity situation, then cutting the policy rates," he said. "It is time to wait and strengthen the credibility by 2018."