Economy in Turkey: TL Deposit Interest Rates Approach 45 Percent, Exceeding the Policy Rate

The actions taken by the Central Bank of the Republic of Turkey (CBRT) and expectations that the bank will not cut rates in its April meeting have stirred the deposit interest rates in the banking sector. With the TL deposit interest rate nearing 45%, it has now surpassed the policy rate.

Particularly, high-volume investments in the shortest 32-day deposit accounts are seeing interest rates between 45% and 47%. Last week, the rates for 32-day deposits were at 42.5% for amounts above 50,000 TL, while deposits under that amount were offered at about 29%. However, the latest data from banks’ websites show that for deposits above 50,000 TL, the interest rate for 32-day deposits has risen to 44.5%, and for even larger deposits, it has reached 45%.

Interest rates for 46- and 92-day deposits remained largely unchanged, staying in the 41%-42.5% range. This high rate for the shortest-term deposits is expected to encourage savings to remain in Turkish lira, preventing a possible shift toward foreign currencies during this period.

Additionally, according to Bloomberg, there is a discussion about reducing the withholding tax on TL deposits and money market funds, which was last increased in February. As of February 1st, the withholding tax for 6-month deposits was increased from 10% to 15%, for 1-year deposits from 7.5% to 12%, and for deposits with maturities over 1 year, from 5% to 10%.