The Central Bank of Turkey (CBRT, its acronym in English) reaffirmed this Wednesday its commitment to the current instruments of monetary policy, amid the climate of distrust in the markets in relation to the institution’s independence.
In an annual report, the Turkish BC said that it will maintain its inflation target at 5% in the medium term in 2022, although price indices have exceeded the annual rate of 20%. According to the document, the intention is to implement measures that bring inflation metrics to the goal.
The central bank, however, withdrew the mentions of monetary tightening from the 2021 report. Under pressure from the president of Turkey, Recep Tayyip Erdogan, the entity went against academic consensus and cut interest rates in the last two meetings, despite the escalation of inflation .
The scenario triggered a wave of sales of the Turkish lira, which fell against the dollar and led the government to adopt measures to stabilize the exchange rate. In the report, CBRT said it intends to prioritize lira deposits next year and announced that it will support the conversion of gold savings into the local currency.
The institution reinforced its commitment to floating exchange rates and explained that rates will continue to be determined by market forces. “CBRT does not have a nominal or real exchange rate target. CBRT will not conduct foreign exchange purchase or sale transactions of foreign currency to determine the level or direction of exchange rates,” the text says.
At around 7:55 am (Eastern), the dollar advances to 12.3703 Turkish lira, up around 4% compared to the quotation at the end of the afternoon on Tuesday.
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