Alternative Financial Conditions in Turkey Have Eased, According to Goldman Sachs

In their prepared report, Goldman Sachs economists Clemens Grafe and Başak Edizgil announced that the alternative financial conditions index eased by 0.3 percentage points following the Central Bank's funding steps.

Central Bank Funding Steps and the Easing in the Index

Economists Clemens Grafe and Başak Edizgil reported that the alternative financial conditions index created by Goldman Sachs showed a significant change. The Central Bank's removal of the special overnight funding facility with a 40 percent interest rate for banks played an effective role in this process.

As a result of this decision, banks were allowed to be funded at the policy rate of 37 percent, and the index has recorded an easing of 0.3 percentage points since this development.

Effects of Interest Rates and Excess Liquidity

The report emphasized that despite the Central Bank keeping interest rates constant at its Monetary Policy Committee meeting last week, the trend of easing in financial conditions continued.

Strategists pointed out that Turkish Lira deposit interest rates declined as a result of the excess liquidity in the banking system.

Latest Situation in Deposit and Loan Interest Rates

Turkish Lira deposit interest rates declined to approximately the 44 percent level in the week ending September 4.

Goldman Sachs stated that this rate has generally become consistent with the annualized policy rate, while consumer and commercial loan interest rates continue to remain at significantly high levels.

Credit Conditions and Growth Trends

Grafe and Edizgil pointed out in their evaluation note published on Friday that there are also some signs of easing in credit conditions.

While recent data revealed that Turkish Lira-denominated credit growth has slowed, it was stated that total credit expansion remained close to the levels last seen in mid-2024.