2023-06-25 04:19:59
Turkey’s central bank took new steps on Sunday, in line with its goals to increase the effectiveness of market mechanisms, following it raised interest rates to 15 percent from 8.5 percent this week.
On Sunday, the central bank said Turkey’s securities maintenance regulations have been simplified to enhance the effectiveness of market mechanisms and support overall financial stability.
He stated in a statement that the decision comes within the framework of the policies announced following the last meeting of the Monetary Policy Committee, on Thursday, and that the simplification process will continue gradually.
According to an announcement in the country’s official gazette, the securities maintenance rate that Turkish banks must set aside for their foreign currency deposits has been reduced to five from ten percent.
With the new regulations, the securities that banks must maintain ranged from three to 12 percent of their lira deposits. It previously ranged between three and 17 percent.
The new regulations also stipulate that banks whose deposits in pounds are less than 57 percent of total deposits will have to hold an additional seven percentage points of securities.
The rising trade deficit and the collapse of the lira
Data from the Turkish Statistical Institute showed, on Friday, that the foreign trade deficit amounted to 12.527 billion dollars in May, an increase of 17.6 percent compared to last year.
The data showed that Turkey’s exports rose 14.4 percent to $21.66 billion in May, while imports increased 15.5 percent to $34.19 billion.
The Turkish lira fell by as much as 2.8 percent and hit a new record low early on Friday, continuing to incur losses following the central bank raised interest rates, Thursday, in a retreat from the policy of President Recep Tayyip Erdogan, in an increase that was less than expected.
The lira reached 25.2015 in its latest transactions once morest the US dollar, a level that was regarding 1.3 percent weaker than Thursday’s close. When the currency hit a low of 25.59, it was almost 27 percent weaker once morest the greenback this year, according to Archyde.com.
The Turkish Central Bank raised the main interest rate by 650 basis points to 15 percent, and said in its first meeting under its new chairwoman, Hafiza Ghaya Arkan, who was appointed by Erdogan following his victory in the elections, last month, that he would go further.
The move represented a change of course following years of monetary easing in which the rate of one-week repurchase agreements (repo) fell to 8.5% from 19% in 2021, in an unconventional policy pursued despite high inflation.
The median forecast in a Archyde.com poll was for a rate hike of 21 percent, and analysts said the lower-than-expected hike indicated Erkan may not have much freedom to aggressively confront inflation under Erdogan’s watch.
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