Central Bank rate cuts ‘clearly reflected in loan, deposit rates’

ANKARA

The Central Bank’s rate cuts have clearly reflected in loan and deposit rates, according to a study by researchers at the bank.

Developments in loan and deposit rates suggest that interest rates of short-term loans and deposits are determined by the policy rate, whereas those of long-term loans and deposits are predominantly determined by expectations and risk perceptions, according to the research.

The other key finding of the research is that to ensure a sustained decline in long-term interest rates, inflation expectations must be anchored and the risk premium must be contained.

“Accordingly, maintaining the tight monetary policy stance is critical for affecting loan and deposit rates as well as achieving a sustainable policy rate transmission mechanism,” the study concluded.

The Central Bank cut its policy rate by a total of 650 basis points between July and October 2025, noted the research.

“These rate cuts had a significant impact on banks’ interest rates between July 4 and Dec. 5,” it added.

“While interest rates on Turkish Lira deposits and commercial loans decreased by around 690 basis points, those of consumer loans fell by around 300 basis points. An analysis by firm size reveals that loan interest rates declined by 630 basis points for large firms, while a stronger reduction of 750 basis points was observed for SMEs,” it said.

While short-term interest rates are directly affected by changes in the policy rate, long-term interest rates are also shaped by factors such as inflation expectations and the risk premium, according to the research.