Banks have started pricing a possible interest rate cut by the end of the year

September 19, 2024 BTT

"Share this post on social media, spread the news"

While markets await the Central Bank of Turkey’s interest rate decision, banks have begun pricing in the likelihood of an interest rate cut by year-end. Experts do not expect a rate change this month but foresee the start of a rate-cutting process either by the end of the year or in the first quarter of 2025. In the banking sector, Turkish lira (TRY) deposit rates have already declined from the high levels seen in the first half of the year.

Banks have started pricing in a possible interest rate cut by the end of the year.

Markets are awaiting the Turkish Central Bank’s Monetary Policy Committee (MPC) interest rate decision, which will be announced today. Experts expect the Central Bank to maintain a tight stance and skip a rate cut this month. Whether the MPC will signal a future rate cut remains a point of curiosity.

According to an AA Finance survey, the median expectation of economists is that the policy rate will be held steady at 50%. All surveyed economists predict the rate will remain at 50%. The average year-end policy rate expectation is 46.65%.

Experts expect the rate-cutting process to begin either in the last month of this year or at the latest in the first quarter of 2025. The banking sector is already pricing in this expectation with standard TRY deposit rates.

Banks, which were offering interest rates above 50% on deposits in the first half of the year, are no longer providing such rates.

BANK DEPOSIT RATES HAVE DECLINED

According to the “Weighted Average Interest Rates on Bank Deposits” (Weekly-Flow), the interest rates on TRY deposits with terms of 1, 3, 6, and 12 months have declined since the week of February 6.

The deposit interest rates, which exceeded 50% in the first half of the year, fell after the summer. By the end of June, standard TRY deposit rates for up to six months fell to 47%, and for terms between six months and one year, rates dropped to 43.5%.

After the June inflation data was announced on July 8, standard TRY deposit rates for terms of up to six months dropped to 40%. For deposits longer than six months, interest rates declined to the range of 38%-34%.