Türkiye’s central bank on Friday said it would maintain its “liraization” strategy in 2023, pledged to use all available tools to ensure price stability and vowed to continue using regulations to support access to credit.
In its annual monetary policy report, titled "Monetary Policy and Liraization Strategy for 2023," the bank said it aims to lift the share of Turkish lira deposits to 60% of all deposits in the banking system over the next six months.
Lira deposits now account for 53% of the total. A year ago, hard currencies accounted for some 65% of all deposits in the banking system, reflecting lira depreciation and high inflation rates.
The Central Bank of the Republic of Türkiye (CBRT) this year unveiled the “liraization” strategy, which it says is its integrated policy framework, seeking to stabilize the national currency, which had been pressured by steep declines.
The bank repeated it had no exchange rate target level and would not buy or sell hard currencies to direct the lira.
The lira lost some 44% of its value against the U.S. dollar in 2021. It depreciated another 30% this year but held mostly stable in the last couple of months.
The monetary authority also said it was maintaining its long-held 5% medium-term inflation target, as the annual inflation rate begins edging down from a 24-year high of over 85% in October.
The Turkish government has emphasized low rates to boost production, investments, employment and exports with the aim of achieving a current account surplus, which it says will lead to a lasting fall in inflation.
The central bank slashed its key policy rate by 500 basis points since August to 9%, citing an economic slowdown.
“Policies will continue to be used in order to permanently increase the weight of the Turkish lira on both the asset and liability sides of the banking system,” the bank said.
A dozen regulations adopted in 2022 meant to dissuade foreign currencies’ use – including state-backed foreign exchange-protected lira deposits – their share has fallen to 47% of all deposits as of last week.
The central bank also said in its report that it would ensure a “steady” increase in international reserves in support of the lira.
The lira has steadied since August, while inflation is expected to fall sharply next year with economists predicting it will dip to 40% by June.
For 2022, the central bank expects inflation to drop to 65.2% by year-end, thanks largely to base effects in December.
