Central Bank's Monetary and Exchange Rate Policy text published

The Central Bank's Monetary and Exchange Rate Policy text has been published. The statements in the text are as follows:

The greatest contribution central banks can make to the increase in social welfare is through the provision of price stability. In this context, the primary objective of the Central Bank of the Republic of Türkiye (CBRT) is to achieve and maintain price stability. The forecasts announced in the Inflation Report will be used as an intermediate target with the function of providing a reference for inflation expectations.

The one-week repo auction interest rate will continue to be the CBRT's main policy tool. Quantitative tightening steps will continue by increasing the diversity of the sterilization tools used.

In order to expand its international sphere of influence, the CBRT will maintain effective communication with its foreign stakeholders, such as international organizations, platforms, and other central banks. In this context, Investor Days will be organized where technical presentations on topics such as inflation, monetary policy, financial markets, and banking will be made.

The simplification process of the current macroprudential framework will continue in 2024.

In 2024, it is aimed to increase the share of Turkish lira deposits in the banking system to 50 percent and to continue the decline in the FX-protected deposit (KKM) balance through steps to be taken to prioritize Turkish lira deposits.

The credit composition will be shaped within a framework that observes the disinflation process and macroeconomic balances.

In this process, measures may be taken to reduce the impact of tightening financial conditions on low-income groups.

In order to maintain the effectiveness of the monetary transmission mechanism and support monetary tightening, the excess liquidity in question will be sterilized by increasing the diversity of the sterilization tools used, and the quantitative tightening process will continue.

The CBRT Open Market Operations (OMO) portfolio size has been determined as 200 billion TL in nominal terms for 2024, with the option for additional purchases reserved.

In order to contribute to the banks' TL and foreign exchange liquidity management, swap transactions will continue in 2024. However, it is planned to gradually reduce the amount of swap transactions carried out by the CBRT.

Foreign exchange against effective transactions between the CBRT and banks authorized to operate in foreign exchange markets will continue.

Foreign exchange liquidity facilities with one-week and one-month maturities will continue to be provided to banks in the Foreign Exchange Deposit Market at the CBRT, with a total limit of approximately 50 billion US dollars.

Banks will be able to bring collateral foreign exchange deposits or gold deposits to the CBRT within the limits granted to them and at various maturities.

International reserves have shown a strong upward trend since the second half of 2023 due to the effects of monetary tightening and the simplification steps taken within the macroprudential framework, reaching 145.5 billion US dollars as of December 22, 2023. In this direction, the strategy of accumulating reserves will continue in 2024 as long as market conditions permit, and the continuity of the stable upward trend in international reserves will be ensured.

In 2024, additional facilitating steps may be taken regarding rediscount credits for exports and foreign exchange-earning services in order to improve the financing conditions of exporting firms and support their access to finance.