Turkish Central Bank to increase reserves via auctions

ANKARA

With the stabilization of capital inflows and reversal of dollarization trend in deposit/participation funds, the Turkish Central Bank will increase its reserves through auctions, the governor said on Tuesday.

"When the conditions are mature enough, we will share our plan for this with the public in an open and transparent manner," Naci Agbal told a meeting with economists.

The bank's most important and indispensable task is to ensure permanent price stability, Agbal stressed, and said it will take all decisions by prioritizing price stability.

"Price stability is the basis of financial and macroeconomic stability," the governor asserted.

He said that tight monetary policy and tightening in financial conditions will lead to a moderate level of economic activity through the demand channel.

"The predictability and tight stance will contribute to a downward trend in inflation, a decline in the country's risk premium, encouragement of savings in Turkish lira, reverse currency substitution trends, a boost in foreign exchange reserves, and a permanent decline in financing costs," Agbal added.

He underlined that the Turkish Central Bank will maintain its tight monetary stance until the 5% inflation target is achieved by 2023.

The bank expects year-end inflation rate to hit 9.4% in 2021 and 7% next year, before stabilizing at around 5% in the medium term.