Turkey’s central bank aims to deposit 60% lira in banks by mid-2023 According to Reuters

© Reuters. FILE PHOTO: The Central Bank of Turkey headquarters is seen in Ankara, Turkey in this January 24, 2014 file photo. REUTERS/Umit Bektas//File Photo

By Nevzat Devranoglu and Ezgi Erkoyun

ANKARA (Reuters) – Turkey’s central bank said on Friday it aims to raise the ratio of lira deposits to 60% of total deposits in the banking system over the next six months and vowed to continue using it. use regulations to support access to credit.

Lira deposits currently account for 53% of the total.

In its annual monetary policy report, the central bank said it was maintaining its long-established 5% medium-term inflation target, as the annual inflation rate begins to fall from its peak. in 24 years over 85% in October.

“Policies will continue to be used to permanently increase the weight of the Turkish lira on both the assets and liabilities side of the banking system,” the bank said.

The central bank, which has implemented a policy of “liraisation” to stabilize the currency due to pressure to cut interest rates, has repeated that it does not have a target exchange rate and will not buy or sell currencies. hard currency to steer the lira.

Inflation has been on the rise since the fall of 2021, stemming from the unorthodox monetary easing cycle that President Tayyip Erdogan pushed to spur economic growth and investment, but trigger a collapse historical currency at the end of last year.

A year ago, strong currencies accounted for about 65% of all deposits in the banking system, reflecting years of lira devaluation and high and volatile inflation rates.

But after dozens of regulations were passed in 2022 to discourage the use of foreign currency – including lira deposits protected by state-backed depreciation – their rate dropped to 47. % of total deposits as of last week.

The lira, backed by indirect foreign currency sales, has been steady since August, while inflation is expected to drop sharply next year as economists predict it will ease. 40% by the time Erdogan faces tight presidential and parliamentary elections, scheduled for June.

The central bank also said in its report that it would ensure a “steady” increase in international reserves to support the lira.

Analysts expect the current 9% policy to remain stable until the election, after which it will depend on whether Mr. The opposition has promised to return to mainstream policies and raise interest rates.

For 2022, the central bank expects inflation to slow to 65.2% by year-end, largely thanks to a base effect in December, compared with a median estimate of 69% during the visit. Reuters’ latest poll.

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