Turkish Central Bank Cuts Reserve Rate for Lira Deposits to Zero
Turkey reduces reserve rate to zero amid inflation concerns
On January 15, 2023, the Bank of Turkey announced it will be reducing the reserve rate to zero for deposits in foreign currency of more than 6 months duration. This measure will take effect on January 20 and its intend is to increase the circulation of money in the market, encouraging growth and investment.
However, this could have an effect on inflation, which previously reached 84%, the highest in 20 years. It is believed that the government decided to reduce the rate in order to avoid a recession before the presidential and parliamentary elections, set to take place in June 2020.
The new measure announced by the Bank of Turkey will reduce the rate applied to deposits in foreign currency and free funds locked up by private banks, making it easier to grant loans.
Economists believe, however, that restrictive measures need to be taken in order to reduce the circulation of money and curb inflation. This, in turn, would help stabilize the lira, which has lost 24% in the last year.
The redistribution and redistribution of all or part of the contents of the Efe services is expressly prohibited, without the prior and express consent of Agencia EFE SA.