Business circles expect lower borrowing costs following rate cut
Business leaders have welcomed the Turkish Central Bank’s move to reduce its main policy rate by 200 basis points to 12 percent, expressing hopes that lenders would follow suit and slash their interest rates on loans.
Since the beginning of this year, the country’s Central Bank has delivered a total of 1,200 basis points rate cut, bringing the one-week repo rate down from 24 percent.
“Those rate cuts will support investment and job creation in the period ahead and economic growth will gain traction,” said Nail Olpak, the head of Foreign Economic Relations Board (DEİK).
“In the wake of the Central Bank’s move, we expect lenders to reduce their interest rates on loans to reasonable levels as soon as possible. What matters to us is in fact the interest rates in the market,” Olpak remarked.
“Considering the rate cuts in the third quarter of this year, growth rate in the final quarter and in 2020 could be higher than expectations,” he said.
Çetinkaya predicts that the Central Bank will deliver more rate cuts after the first quarter of 2020.
He also expects investment appetite to grow which will eventually trigger more investments.
Çetinkaya pointed out that household spending increased in the third quarter after falling in the previous two quarters while the pace of contraction in the construction sector eased thanks to lower costs on housing loans.
“Considering that companies had been selling goods in their inventories, firms, however, have almost depleted those inventories, rising demand and lower loan costs that will follow the Central Bank’s move will help markets revive,” he said.
Çetinkaya also expects the recovery in exports to continue going forward.