NEWS Finance        12/10/2020

Turkish Central Bank raises interest rate on TL reserve requirement

The Turkish Central Bank has increased the interest rate by 200 basis points for all banks, taking a further backdoor tightening step rolling back measures it had adopted to ease the coronavirus fallout. The Bank said that lenders that meet real loan growth requirements will have a 9% remuneration rate on lira required reserves, while the rate for others will be 2%. The new rates will be effective as of October 16th.

 

The Bank has also halved the commission rate on required reserves for forex deposits and participation funds. The rate now stands at 0.0125% for dollars and 0.00125% for other currencies.

 

The Bank said that the above moves will improve financial stability and the monetary transmission mechanism, as well as decreasing the banking system's transaction costs.

 

The Bank has recently taken liquidity steps to normalize policy since coronavirus restrictions were lifted were mostly lifted in June. The Bank's mostly backdoor steps have raised the average cost of funding to 11.64% as of Friday October 9th. . The policy interest rate was raised to 10.25% last month.



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