Türkiye’s central bank chief on Wednesday said the monetary authority’s current policy framework “has the power” to ensure a fall in inflation and that targeted loan policies would continue to support exports and investment.
Last week, the Central Bank of the Republic of Türkiye (CBRT) held its benchmark policy rate at 8.5%, saying it had become even more critical to keep financial conditions supportive of preserving growth momentum after last month’s devastating earthquakes.
In a speech in Ankara, CBRT Governor Şahap Kavcıoğlu said the process of decline in inflation had started with the support of the policies the bank implemented.
Türkiye’s annual inflation fell to 55.18% in February, marking a notable regress from the peak of 85.5% – a 24-year high – registered last October.
“The deceleration process in inflation is taking place in an environment where many major shocks threatening our economy are experienced one after the other,” Kavcıoğlu said.
He stressed the Russia-Ukraine war prevented the early and rapid decline in inflation but said a permanent decrease would be achieved with the authority’s liralization strategy.
Unveiled last year, the strategy, which the bank says is its integrated policy framework, seeks to stabilize the national currency, which steep declines had pressured.
“The liralization strategy created with the perspective of sustainable and permanent price stability will continue to be implemented with determination in the coming period,” the governor said.
Kavcıoğlu said Türkiye needed to develop its export capacity to increase its ability to achieve a lasting current account surplus.
The Turkish government has endorsed low interest rates to boost production, investments, employment and exports to achieve a current account surplus, which it says will lead to a lasting fall in inflation.
Last year, the central bank cut its benchmark one-week repo rate by 500 basis points to counter an economic slowdown and held it at 9% in December and January. It trimmed it by another 50 basis points in January to boost industrial production and employment after the earthquakes before it left the key policy unchanged last week.
Kavcıoğlu said they had decreased financing costs, which he said was permanent and increased financial predictability.
“We will continue to develop our targeted credit policies in a way to support export and investment capacity from the favorable financing cost opportunities offered by the declining policy rates,” he noted.
