We haven't reported on the Turkish economy for a while, so we thought it might be useful to have an update.

In this article we cover interest rates, inflation (CPI), and currency exchange rates.

Our report follows the latest meeting of the rate setting Monetary Policy Committee, which took place on Thursday 23rd June.

Interest rates
The 'Policy' rate remains at 6.25%, the Overnight Borrowing rate is still 1.5%, and the Lending rate stays put at 9%.  In short, no change.

The 'Policy' rate was last changed back in January, whilst the Lending rate has been at 9% since December 2010.

If you want to see the rationale behind this decision on interest rates, click here to read the CBT statement in full: Central Bank of Turkey

If you are a KTLN regular, you will know that we tend to focus on the Lending rate, as this broadly reflects the rates available for savings in Turkish banks.  And that's what many of our readers are interested in.

Remember, that the KTLN home page has links to the live interest rates on offer from all the banks operating in Kalkan.  They are all there, in one place, for your convenience.

Now, the latest data available reveals a sudden and dramatic increase in Turkish inflation, from 4.26% in April, to 7.17% in May. 

The main contributory factors were increases in the cost of food and non-alcoholic drinks (+12.61%); transportation (+8.69%); miscellaneous goods and services (+7.68%); furnishings and household equipment (+7.40%), and hotels, cafes and restaurants (+7.20%).

On Wednesday, the CBT revised upwards, its prediction for year end inflation in Turkey, from 7.54%, to 7.61%.

The chart below shows in detail, the ups and downs of the exchange rate over the last 5 years.  Anyone travelling from Britain to Turkey at the moment is getting good value.  The last time you could get 2.6 TL to the pound was back in October 2008.

Rates chart sourced from www.oanda.com 

We have updated a comparison table that we last published in August 2010.  It shows a June snapshot over the last 6 years for interest rates, exchange rates and CPI.

What does all this mean?
Well, in Kalkan, life goes on as usual, but these economic factors do make a difference to all of us.

For those who came out to live in Kalkan, with a lump sum to invest for their retirement, those heady days of 20%+ interest on your money are long gone, and are most unlikley to return. 

We look back on those bonanza days, with some amazement now.  But rather than bemoaning the fact that rates have come down, we look at it in a positive way - it was good whilst it lasted.

And we must remember the bigger picture.  The only reason Turkey was paying so much interest, was because the state of their economy required it, to attract inward investment. 

Whilst it would not be correct to say the Turkish economy is in perfect condition, it is far stronger than it has been for some time, and it is no longer necessary to pay top rates of interest. 

The Central Bank of Turkey was praised for its handling of the recent global financial meltdown, and in economics, everything is relative.  Turkey is not Greece, or Ireland, or Portugal, or Spain.  Thankfully.

For anyone thinking of transferring a lump sum to Turkey, you will now get more lira for your pound, than you would over the last few years.  But remember, whilst the exchange rate appears relatively good, and you may get a better rate of interest with your savings in a Turkish bank, if you ever need to repatriate your money, you are exposed to exchange rate risk.

For those visiting Kalkan on holiday, you too will benefit from getting more liras for your pounds, but as you can see from the CPI numbers, prices are going up this year.  So it's swings and roundabouts. 

Still, given our travels through Europe recently, and considering what we got for our euros, we reckon Kalkan still offers a quality experience that is great value for money.

If you are a KTLN member, check out our Knowledge Bank, Finance section, for more articles.

Kalkan Turkish Local News - your window on Kalkan Turkey