TRNC Central Bank cuts lira deposit rate from 35.50% to 32.50%

The Central Bank of the Turkish Republic of Northern Cyprus (TRNC) has lowered the annual interest rate on Turkish lira deposits held with it from 35.50% to 32.50%, regardless of the deposit term. The new rates take effect on 28 August.

The decision reverses the increase introduced in the spring: on 6 April, the regulator raised the same rate from 32.50% to 35.50%. Terms for foreign-currency deposits remain unchanged, while the rate on advance transactions secured by foreign currency has been cut from 44% to 41%.

Rediscount rates have also been revised — the rates applied when commercial bills are rediscounted, allowing banks to obtain financing from the Central Bank. For bills denominated in Turkish lira, the discount rate has been reduced from 44% to 41%; for bills related to industry, exports, tourism, education and agriculture, from 39% to 36%; and for bills issued by small businesses, from 37% to 34%.

Following the regulator’s move, the question is whether commercial banks will follow suit and lower interest rates on deposits and loans for their customers.

The Central Bank of Türkiye had shortly beforehand resumed weekly repo auctions and lowered the cost of market funding from 40% to 37%. The move was seen by the market as a signal that rates could be cut in September; Türkiye’s policy rate currently stands at 37%.