The Central Bank’s recent actions to curb excess liquidity have triggered a notable uptick in deposit interest rates. Here’s how the Central Bank’s interventions are impacting deposits…
The Central Bank’s implementation of reserve requirement measures has catalyzed a surge in deposit interest rates.
Last Thursday, the CBRT rolled out several initiatives aimed at curbing excess liquidity within the market.
Among these measures, a monthly cap of 2% was imposed on the growth of foreign currency loans, while mandatory reserve ratios for Turkish lira and foreign exchange-protected deposit accounts were elevated.
Following the enforcement of these reserve requirements, the market’s interest rate benchmark, TLREF, witnessed a climb from approximately 47% to 53%, concurrently pushing deposit interest rates higher.
THE REASON BEHIND THE DECLINE IN DEPOSIT RATES
The substantial surplus of Turkish lira liquidity, stemming from the CBRT’s robust accumulation of reserves, reaching a staggering $51 billion, exerted downward pressure on overnight interest rates and deposit rates.
Preceding the CBRT’s decisions, overnight interest rates hovered around 47%, marking the lower band of the CBRT’s interest rate corridor. The liquidity surplus in the system surged to nearly ₺600 billion last week.
Economists emphasized that deposit rates had dipped below the policy rate, signaling potential risks associated with this situation.
In light of this, excess liquidity was anticipated to dominate discussions at the Monetary Policy Committee meeting scheduled for Thursday.
IMPACT OF CBRT’S MEASURES
Following the CBRT’s actions, TLREF surged to 50.8% on Thursday, subsequently settling at 53% on Friday, reclaiming its position within the upper band of the interest rate corridor.
Bankers estimated that the required reserve measures would permanently withdraw over ₺500 billion from the market.
INCREASE IN DEPOSIT INTEREST RATES
Economists had anticipated that the CBRT’s measures would reverberate throughout the week.
As anticipated, deposit interest rates saw an 8-9 point increase.
Interest rates on TL deposits for modest balance savings approached the 50% mark once again, while higher balance accounts reached 54%.
In recent weeks, despite deposit interest rates dwindling to 41% for smaller balance savings, speculations circulated that they might plummet to 30%.
Source: NTV / Prepared by Irem Yildiz