CBRT makes a move on forward foreign exchange sales: Held talks with banks

While the Turkish Statistical Institute (TÜİK) announced February inflation as 4.53 percent, ENAG had announced February inflation as 4.32 percent. As the TL loses value against inflation, a move has come from the Central Bank of the Republic of Turkey (CBRT). 

The CBRT carried out a Turkish Lira-settled forward foreign exchange sale transaction yesterday, amounting to 475 million dollars, a transaction it last performed on July 14, 2023. 

REGULATION MADE ON LOANS

According to a report by Sözcü, demand for foreign currency and gold has increased due to the impact of inflation coming in higher than expectations, the current account deficit, and foreign portfolio outflows ahead of the elections. 

While predictions are circulating that the CBRT may be forced to increase its 45 percent policy rate after the elections, the bank took new steps yesterday. In addition to the Turkish Lira-settled forward foreign exchange sale, additional tightening steps came from the CBRT last night.

It was decided to reduce the monthly growth limit for Turkish Lira commercial loans from 2.5 percent to 2 percent, to reduce the monthly growth limit for consumer loans from 3 percent to 2 percent, and to maintain the 2 percent limit for vehicle loans.

In the CBRT's announcement last night, it was stated, "In addition to the securities maintenance requirement, work is ongoing on establishing reserve requirements based on loan growth. Furthermore, work is underway on additional steps to strengthen the monetary transmission mechanism."

CBRT HELD TALKS REGARDING INCREASED FOREIGN EXCHANGE DEMAND

On the other hand, the CBRT held phone calls with banks yesterday to understand the source of the increasing foreign exchange demand and to "prevent unnecessary volatility" in the market.

According to information provided to Reuters by two banking sources close to the matter, CBRT officials held meetings with banks yesterday regarding the foreign exchange demand that has increased in the market in recent days.

A banking source stated that the CBRT told banks during the meeting to pay attention to "unnecessary foreign exchange demand" and said, "The CBRT gave the message, 'Let's talk more, let's understand where the demand is coming from.' It was a meeting held both to understand what is happening and to prevent unnecessary volatility."