Turkish overnight rates drop, eyes on central bank meeting
ISTANBUL, Sept 18 (Reuters) -Turkish overnight interest rates have fallen to some 47.4% from 53% in the last 10 days due to excess liquidity after a sharp rise in central bank forex reserves, ahead of Thursday's central bank policy meeting.
Turkey's central bank is expected to hold its policy rate steady at 50% and keep it there until at least November before cutting, according to a Reuters poll. It is seen lowering the rate by more than 20 percentage points by the end of 2025.
Some banks have reduced long-term loan and deposit rates due to expected inflation declines. One-year and longer term deposit rates at some private banks fell to 30-35% from around 40-45% in July. State lender Ziraat Bank this week lowered its monthly interest rate on 5-10 year housing loans to 2.79% from 3.09%.
Analysts say the bank may on Thursday hint more clearly at its expected policy path and possibly adjust or even drop a past repeated pledge that it was prepared to tighten more as needed.
Annual inflation fell to just below 52% in August, down from 75% in May, the highest level since late-2022, as a monetary tightening campaign began to take effect. The government expects inflation to fall to 17.5% by the end of 2025.
On Monday, bankers said the central bank's net foreign reserves rose some $9 billion last week, surging amid foreign investor demand after net reserves fell for three weeks.
The bank's reserves accumulation caused lira liquidity to rise to 310 billion lira as of Tuesday, bankers said.
They said they had started to expect a new liquidity step from the central bank as overnight rates approached 47%, the lower band of the bank's interest rate corridor.
The central bank launched an aggressive tightening campaign in June of last year, raising its policy rate from 8.5%. It has kept the rate steady at 50% since March.
Reporting by Nevzat Devranoglu and Ebru Tuncay;
Writing by Daren Butler;
Editing by William Maclean
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