Turkish deposit rates drop to lowest since September - report

Interest rates on Turkish bank deposits declined to the lowest level since September after the central bank reduced borrowing costs for banks, Sabah newspaper said.

Returns for lira deposits holders dropped four percentage points in three weeks, Sabah said, citing data from the banking watchdog. The average interest rate on one-month deposits now stands at 18.47 percent, the lowest level since Sept. 7 last year, it said.  

Turkey’s central bank slashed its benchmark lending rate by 425 basis points to 19.75 percent in July after President Recep Tayyip Erdoğan sacked its governor and called on policymakers to support the economy. The bank had kept rates on hold at 24 percent since October to help arrest a currency crisis and tame inflation. Consumer price inflation has slowed to 16.7 percent from a 15-year high of 25.2 percent 10 months ago.

The central bank rate cut has also brought down average interest rates on loans, Sabah reported. Rates on trade credits fell to 21.4 percent on Aug. 2 from 23.7 percent on July 19, the newspaper said. Rates on mortgages have declined to 19.4 percent from 21.3 percent, it said.

State-run banks lowered the interest rates they charge on loans to below inflation last month in support of the government’s efforts to revive economic growth. The country emerged from a recession in the first quarter of the year, thanks to an upsurge in lending by the same banks. The government has called on non-government banks to follow suit.

Increasing confidence in the lira means deposits held in the currency have grown by 40 billion liras ($7.1 billion) to 1.08 trillion liras in a month, the third highest figure on record, Sabah said.