Turkey’s central bank will firmly target its inflation targeting system using its tools for sure, its chief said Friday.
Monetary policy decisions will be taken by maintaining the focus on price stability, said Central Bank of the Republic of Turkey (CBRT) Governor Naci Ağbal, a day after the bank seized its key policy rate by 200 basis points in a larger-than-expected move as it tries to cool double-digit inflation.
Ağbal was speaking at a presentation to the Parliament’s Planning and Budget Commission on central bank activity and monetary policy practices.
The regulator suggested that lasting price stability would drive economic growth by increasing investments and productivity.
Ağbal also explained that price stability meant that inflation was falling to such a low level that it no longer plays a role in investment and spending decisions.
“The emerging risks associated with inflation require a strong and firm stance in monetary policy,” the regulator said.
“Tight monetary stance will continue with determination until there are strong signs of price stability and a sustained decline in inflation,” he said.
CBRT on Thursday raised their one-week repo rate to 17% from 15% at the last meeting of the Monetary Policy Committee (MPC) of the year. He reiterated his “firm” commitment to a tight policy to permanently reduce inflation, which stood at 14% last month.
They said the tension was “strong” for “eliminating risks to the inflation outlook, including raising inflation expectations and reversing the disinfection process as soon as possible. . “
Ağbal last week told reporters that this year’s Turkish lira fall has kept inflation well above the bank’s target range of around 5%.
However, he confirmed that the bank was determined to meet the 9.4% inflation forecast for the end of 2021.
He said the goal for 2023 is to meet the long-term target of 5%.
The tension came on Thursday after a massive walk of 475 points last month, the first move Ağbal made after taking the bank back.
Main one-week repo rate policy tool
The bank simplified their monetary policy after the meeting by stating that all funds will be provided through the main policy stage, the one-week repo stage.
“The CBRT monetary policy tool is the one-week repo rate,” Ağbal said, confirming that the flat rate corridor and late liquidity window machines would not be used outside of their stated purposes.
“The late liquidity window or flat rate corridor will not be used in 2021 to replace the main policy tool,” he said.
The bank’s Twitter account said it said the bank will not buy or sell forex to determine exchange rate.
Ağbal also confirmed that the bank will aim to increase its forex reserves in a transparent way. He said last week that $ 21 billion (TL 160.12 billion) repayment credit results should be added in 2021.
Strong course in economic activity
The regulator also said that the indicators for the last quarter of 2020 indicate a strong course in economic activity.
Led by fiscal stimulus and the construction of virus-related locks, the country’s gross domestic product (GDP) grew 6.7% year-on-year in the third quarter, after contracting 9.9% in all three months earlier when locksmiths were put down. first wave of coronavirus.
“The economy continues the trend achieved in the third quarter in production, consumption and investment,” Ağbal said.
Turkey has seen growth of 0.3% this year but has said a 1.5% shortfall is possible under worst-case scenarios. It is projecting a 5.8% conversion in 2021.
Ağbal noted that the growth rate in 2021 will be largely shaped by the fundamental impact of growth in 2020, noting that the global economy, which received a short contract this year, will ‘get back next year. However, he warned of downside risks according to the course of the coronavirus pandemic.
During this period, global inflation and commodity prices will improve in line with the course of the revolution, he said.
In terms of consumption, Ağbal said the growth was largely driven by domestic demand, noting that net export contribution is at low levels due to the weak course of tourism.
Getting back in tourism
Separately, Minister of Culture and Tourism Mehmet Nuri Ersoy suggested that Turkey would be the fastest recovering country next year in the tourism sector.
Speaking at Turkey Innovation Week held almost exclusively by the Turkish Exporters Assembly (TIM), Ersoy said the country outperformed its competitors in 2020 during the whole outbreak. -spread, it gained worldwide trust and became the country of choice for several markets such as Russia and Ukraine.
With the safe tourism certification program, Turkey has taken major steps against the pandemic in the tourism sector to protect both foreign visitors and workers in the region, he recalled.
Recalling that Turkey ended 2018 and 2019 with the highest numbers in the field of tourism, Ersoy said that tourism is the most valuable sector for generating income and employment.
Turkey ranked 26th in global services exports, adding, “We should focus on how we will be in the top 10 countries.”
Turkey should innovate to increase its share of global services exports, he stressed.
Ağbal also suggested that the delayed demand has been implemented quickly, backed by strong credit acceleration, adding that private spending and investment spending were seeing a significant increase.
“Therefore, the recovery and strong movement of the economy on the production, consumption and investment side continues in the fourth quarter,” Ağbal noted.