Recently, with inflation coming in above expectations, along with the current account deficit and foreign portfolio outflows ahead of elections, there has been an increase in demand for foreign exchange and gold.
While there are predictions that the Central Bank of the Republic of Turkey (CBRT) may need to increase its policy rate of 45% after the elections, the bank took new steps yesterday.
In addition to the Turkish lira-settled forward foreign exchange sale, the CBRT announced additional tightening measures last night.
Decisions were made to reduce the monthly growth limit for TL commercial loans from 2.5% to 2%, for consumer loans from 3% to 2%, and to maintain the 2% limit for automobile loans.
In the CBRT’s announcement last night, it was stated, “Work is ongoing to establish mandatory reserves based on credit growth in addition to securities settlement. Furthermore, additional steps are being taken to strengthen the monetary transmission mechanism.”
CALL FROM THE CENTRAL BANK TO BANKS
Meanwhile, the CBRT held telephone discussions with banks yesterday to understand the source of the increased demand for foreign exchange and to “prevent unnecessary volatility in the market.”
According to two banking sources familiar with the matter who spoke to Reuters, CBRT officials discussed the increased demand for foreign exchange in the market in recent days with banks.
One banking source stated that the CBRT told banks during the discussion to “be careful about unnecessary foreign exchange demand” and said, “The CBRT wanted to have more discussions to understand where the demand is coming from and to prevent unnecessary volatility. It was both about understanding what is happening and preventing unnecessary volatility.”
At the time of writing the news, the CBRT could not be reached.
