CBRT/Karahan: We Continue to Support Our Tight Monetary Policy Stance with Macroprudential Measures

Forex - The President of the Central Bank of the Republic of Turkey (CBRT), Fatih Karahan, emphasized that they continue to support the tight stance of monetary policy with macroprudential policies. President Karahan stated that the CBRT closely monitors issues related to financial stability and shares a summary of recent developments with the public through the Financial Stability Report published twice a year. He said:

"Since the previous issue of the Financial Stability Report, while the tightness in financial conditions has been maintained, the disinflation process continues. The tightness in financial conditions has contributed to the balancing process in domestic demand, while the improvement in the current account has become more pronounced. We continue to support our tight monetary policy stance with macroprudential policies. Indeed, with the contribution of the strengthened macroprudential framework, credit growth is in line with the disinflation path. As the monetary transmission mechanism strengthens, pricing in financial markets aligns with the policy interest rate and expectations.

The continuation of the disinflation process is increasing interest and confidence in Turkish lira assets. The share of Turkish lira deposits continues to rise steadily. The significant decline in the currency-protected deposit balance has strengthened the monetary transmission mechanism and reduced the risks on the Central Bank's balance sheet. The tight monetary policy we consistently maintain will continue to ensure that deposit interest rates remain at supportive levels for Turkish lira savings.

The current policy mix supports the improvement in the risk perception regarding the Turkish economy and the decline in risk premiums. As a reflection of this, the overseas borrowing capacity of firms and banks has strengthened. With the contribution of firms' low debt levels, the reflection of tightness in financial conditions on asset quality indicators has been limited. In addition to banks' prudent reserve policies, strong capital and liquidity buffers ensure that risks remain at manageable levels.

I hope that the 39th issue of our Financial Stability Report, which includes the global and domestic macro-financial outlook as well as recent developments related to financial stability, will be beneficial for all readers."