Türkiye’s central bank Friday said it seeks to maintain a reserve "buildup strategy" in 2024 to continue an upward trend in its international foreign currency reserves, which it says is essential for effective monetary policy and financial stability.

The aim is part of the plans outlined in the Central Bank of the Republic of Türkiye’s annual monetary policy report for 2024.

The comprehensive document covers a range of topics, from reserve rebuilding, foreign exchange, inflation to liquidity management, international engagement and strategic measures aimed at ensuring economic stability.

The bank’s reserves have been maintaining an upward trajectory since it embraced more conventional policymaking after the May elections.

The data on Thursday showed its total reserves reached a record $145.5 billion in the week through Dec. 22.

The figure marks a $47 billion increase from $98.5 billion before the May vote.

The bank attributed the trend to the monetary tightening, and the steps taken to simplify the macro-prudential framework since the second half of 2023.

It said the accumulation of foreign exchange would continue "as long as market conditions allow."

After the May vote, Türkiye shifted from a yearslong easing policy and delivered aggressive monetary tightening aimed at arresting soaring inflation, reducing trade deficits, rebuilding foreign exchange reserves and stabilizing the Turkish lira.

Since June, the central bank has lifted its one-week repo rate by 3,400 basis points. It has suggested it was closer to the finish line by saying it expects to "complete the tightening cycle as soon as possible."

The bank looks to continue to conduct swaps with banks in the new year to support their lira and foreign exchange liquidity management. Still, it said it plans to gradually reduce the amount of swap transactions.

In its report, the CBRT said it aims to increase the share of lira deposits to 50% in the banking system and to sustain the fall in the government-backed scheme safeguarding lira deposits against foreign exchange depreciation in the new year.

The government began rolling back the so-called KKM scheme and announced measures after the May elections to dissuade companies and individuals from renewing the KKM accounts, which reached a record of over TL 3.4 trillion ($116 billion) in mid-August.

The total has dropped by about TL 700 billion to TL 2.68 trillion as of Dec. 15, Vice President Cevdet Yılmaz said this week.

The scheme, unveiled in late 2021, sought to keep dollarization at bay by encouraging people to keep their savings in lira through guarantees to compensate for losses from decline against hard currencies.

The central bank also said the open market operations portfolio size will be TL 200 billion ($6.77 billion) for 2024, adding that it will continue to implement quantitative tightening and take steps for the simplification process.

It said it was maintaining its long-held medium-term inflation target of 5% and repeated that it had no foreign exchange target level and would not buy or sell hard currencies to direct the lira.

The central bank expects inflation to rise from nearly 62% last month to 70-75% in May, before dipping to about 36% by the end of next year as tightening cools prices.

The bank emphasized that the forecasts in the inflation report would serve as intermediate targets to guide expectations, providing a framework for assessing and adjusting policies.

The Monetary Policy Committee (MPC) will convene 12 times in 2024, it said, adding that it would continue to use liquidity management instruments to ensure the efficiency of the monetary transmission mechanism.

"Monetary tightness and monetary transmission may be supported with quantitative tightening decisions by closely monitoring liquidity developments," it noted. It said it would continue to implement quantitative tightening by extending the sterilization tools at its disposal.

This move aligns with the bank's goal of furthering the simplification process of the existing macro-prudential framework throughout 2024.

"Monetary policy decisions will be made by taking into account a detailed analysis of prices on macro and micro levels, inflation expectations and pricing behavior, demand factors that monetary policy can affect, supply-side developments, domestic and external balance, financial conditions including the saving tendency and loans, as well as developments in other factors affecting liquidity and price stability," it added.

The bank is poised to maintain effective communication with international organizations and foreign stakeholders, seeking to expand its global influence.