Economy in Turkey: Interest Rates on Deposits and Loans Continue to Decline

The gradual decline in interest rates on loans and deposits continues, yet the rates still remain significantly above official inflation levels.

Deposit Interest Rates Also on a Downward Trend

Short-term deposit rates are sliding. For deposits with up to 1-month maturity, the average interest rate was 50.57% last week—down from over 56% in mid-May and 53% in mid-July. Back in mid-March, before the recent rate moves, it stood at 47.98%.

For deposits with 1 to 3-month maturity, the average rate fell to 51.55% last week, compared to over 59% in mid-May and 56% in mid-July. In mid-March, this rate was around 49.91%.

Deposit rates with 3 to 6-month maturity had dropped to as low as 38% two weeks ago, after peaking above 47% in June. However, last week saw a slight rebound to 41.06%.

For longer terms, the average rate last week was 44.79% for deposits with 6 to 12-month maturity, and 32.70% for those exceeding one year. Across all maturities, the average stood at 50.50%.

It’s important to note that these averages mostly reflect rates offered on high-volume deposits. Many individual savers may encounter lower rates at their banks.

Looking Ahead: What to Expect from Interest Rates

After bringing the policy rate down to 43% in July, the Central Bank is expected to continue its rate-cutting cycle in the September meeting.

Despite the ongoing cuts, the CBRT is anticipated to maintain a tight monetary stance by keeping real interest rates high. In this scenario, loan interest rates are likely to stay well above the inflation rate, preserving the real yield for lenders.