New interest rate move from banks... Deposit rates exceed policy rate: Is a withholding tax cut on the agenda?

The tightening measures announced one after another by the Central Bank in recent months to support the Turkish Lira have directly reflected on banks' deposit interest rates. The steps taken to stop the depreciation of the TL have caused banks to update their time deposit interest rates. Current figures show that deposit interest rates have exceeded the policy rate of the Central Bank of the Republic of Turkey (TCMB).

DEPOSIT RATES HAVE SURPASSED THE POLICY RATE

Deposit interest rates, which moved in parallel with the 42.5 percent policy rate until last week, have settled in the 45-47 percent band with the updates. While this rate is clearly seen in 32-day time deposit accounts, offers starting from 29 percent for low-amount TL deposits are noteworthy.

As of yesterday, banks updated the interest rates on their websites, increasing the rate to 44.5 percent for deposit accounts of 50 thousand TL and above. For accounts with higher balances, the rate rose to 45 percent. There were no changes in most banks for 46 to 92-day time deposit interest rates, with rates remaining at the 41-42.5 percent level for these maturities. It is stated that this move is intended to encourage savers who might turn to foreign currency in the short term to remain in TL.

EXPECTATIONS SHAPED AHEAD OF THE APRIL 17 INTEREST RATE DECISION

The decisions taken by the economic administration to tighten liquidity have also influenced expectations ahead of the Central Bank Monetary Policy Committee (PPK) meeting to be announced on April 17. Economists predict that the TCMB, which has cut interest rates for three consecutive months, may pause interest rate cuts at the upcoming meeting. This expectation has accelerated banks' upward revisions to deposit interest rates.

CLAIMS OF A REDUCTION IN WITHHOLDING TAX RATES

Another development that closely concerns depositors is the claim made regarding withholding tax. According to a report by Bloomberg based on industry sources, a reduction in the withholding tax rates applied to TL deposits and money market funds, which were raised in February, has come to the agenda.

With the regulation effective from February 1, the withholding tax on TL deposits with maturities up to 6 months was increased from 10 percent to 15 percent, from 7.5 percent to 12 percent for maturities up to 1 year, and from 5 percent to 10 percent for maturities longer than 1 year. It has been suggested that the economic administration is working on the possibility of reducing these rates again to encourage investors.

INVESTORS HAVE THEIR EYES ON THE ECONOMIC ADMINISTRATION

Both the TCMB's interest rate decision in April and the expectations regarding a withholding tax cut are seen as signs of new activity in the deposit market in the coming days. Economists emphasize that TL savers, in particular, will continue to closely monitor interest rates.