Turkish Central Bank aware of its responsibility on inflation

ANKARA/ISTANBUL

The Turkish Central Bank is aware of its responsibility in reaching the medium-term inflation target of 5%, said Governor Naci Agbal on Friday.

The bank will implement all aspects of the inflation-targeting framework, he said at his presentation to the committee on planning and budget of the Grand National Assembly of Turkey.

He reiterated that monetary policy decisions will be taken by giving priority to price stability, saying upside risks to inflation require the monetary policy stance to be tight and decisive.

"When decision-makers in the economy stop taking inflation as a decision parameter, it means that there is price stability in that country.

"If permanent price stability is achieved in a country, sustainable growth, employment, fair income distribution, and social welfare increase are achieved."

He said national income data and indicators for the last quarter-point to a strong revival in economic activity.

Tight monetary stance

He predicted a strong investment tendency in the manufacturing industry for the next 12 months.

"Domestic demand strengthened due to the cumulative effects of high credit growth during the pandemic and this increased the current account deficit," he said.

Agbal stated that the positive developments in the economy reflected on the employment market where opportunities gradually increased.

For effective monetary policy and financial stability, he underlined, foreign exchange reserves will be strengthened and relevant tools will be used to this end under appropriate conditions in a transparent way and within a specific framework.

In the upcoming period, the tight monetary stance will resolutely continue until strong indicators point to a permanent decline in inflation and price stability, Agbal stressed.

He recalled that the Central Bank Monetary Policy Committee made a strong monetary tightening move for keeping inflation under control and starting a disinflation process rapidly.

The committee increased the bank's policy rate by 200 basis points to 17% on Thursday, after rising by 475 basis points in November.

Fluctuating exchange rate regime will continue in 2021 based on the free market, he said.

"The Central Bank has no real exchange rate target, the bank will not buy or sell foreign currencies to determine exchange rates," he added.