Turkey's central bank has taken new measures to deter bank depositors from transferring savings into foreign currencies and ease pressure on the Turkish lira after the end of an aggressive cycle of interest rate hikes, Bloomberg writes.
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Support measures
Keeping deposits in foreign currency has become more expensive for commercial banks.
Reserve requirements for lira accounts linked to foreign currency that are part of the savings program have been relaxed adopted by the government to support the exchange rate of the national currency.
Reserve requirements for bank deposits with currency protection with a maturity of up to six months will be reduced from 30% to 25%.
The additional reserve requirement ratio for foreign currency deposits/participation funds opened in Turkish Lira will be increased from 4% to 8%.
Read: Turkish Lira collapsed to a new historical low
What will this give
Thanks to these measures, the Central Bank of Turkey expects to stimulate the flow of household funds into deposits in Turkish lira, as well as to continue the process of quantitative tightening.
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Opinion of economists
According to economists at QNB Finansbank, these measures will partially offset each other, and the net effect will lead to the withdrawal of some excess liquidity from the financial system.< /p>
Recall
Last week, the Central Bank of Turkey raised the rate to a new maximum in more than 20 years. Turkey's central bank raised its policy rate by another 250 bps. — from 42.5% to 45% per annum. The previous time the rate exceeded this value was more than 21 years ago – in early December 2002 it was 46%.
The regulator has completed the cycle of tightening monetary policy, the publication writes. The Central Bank of Turkey said in a press release that the tightening of monetary policy has already reached the level that is necessary to begin the process of reducing inflation.
