On 24th June KTLN published a Local News article outlining Turkish interest rate history, and we mentioned that the outlook was for further modest rate cuts.  See June article: click here.

We followed that with an update on 21st July, when we informed you that rates were continuing downwards.  See July article: click here

The Turkish Monetary Policy Committee (TMPC) met again yesterday, Tuesday 18th August, and once more, as expected, interest rates were further reduced.  The lending rate has come down by 0.5% to 10.25%.  This rate represents broadly what you might expect to earn (gross) on a lump sum investment with a Turkish bank.

In August 2008 the equivalent rate was 20.25%, so savers have seen the interest they earn roughly half in 12 months.  So what does the future hold?

The TMPC repeated their comment of one month ago, saying that "...further measured rate cuts will be necessary in the short term unless there is a robust recovery in economic activity".  As the current economic data continues to show a slow and protracted recovery, KTLN concludes that more rate cuts are on the cards. Expect more of the same next month.

For those whose budgets rely significantly on interest income, this fallout from the credit crunch must be having quite an impact now.

You can read the rationale for this decision by looking at the Central Bank of Turkey website.