As it struggles with rising inflation, Turkey's central bank is choosing a fresh approach to monetary tightening despite earlier indicating that its cycle of rate hikes was complete. With effect from Friday, the bank sent lenders a directive telling them to place a portion of their mandated lira reserves into blocked accounts.
According to Reuters on Thursday, this has resulted in increased loan rates and smaller loan restrictions for certain banks. Some institutions have lowered their commercial loan limits to 100,000 lira, or $3,100.Meanwhile, balance of payments data released this week shows that Turkey saw a decline in reserves in January for the first time since May 2023.
In February, the annual inflation rate of consumer prices in Turkey reached 67.07%. The impressive numbers have increased worries that Turkey's central bank, which had hinted last month that it was done with its agonizing eight-month cycle of rate hikes, could have to start tightening again.
Capital Economics stated that "pressures on Turkish policymakers are building ahead of the local elections on March 31st as capital inflows have slowed and FX reserves are falling again." "We don't think the central bank will raise interest rates next week, but we are increasingly certain that Q2 will see at least one more hike."
https://www.cnbc.com/2024/03/15/turkey-opts-for-new-tightening-strategy-after-signaling-pause-to-hikes.html
3 comments:
What are the potential consequences of the high annual inflation rate of consumer prices in Turkey, and how is it impacting the economy and consumers?
I wonder what some of the key causing factors of this have been? Hopefully this next hike is the last one Turkey will have to endure, but only time will tell.
Turkey’s Central Bank should really pay attention to the impact on consumers and the underlying factors contributing to these progressions.
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