Turkish central bank chief met with the management of the Banks Association of Türkiye (TBB) to evaluate the current situation in the banking sector, Anadolu Agency (AA) reported Thursday citing that the meeting addressed a number of topics, including reducing foreign currency conversion deposits.
The report cited Central Bank of Republic of Türkiye (CBRT) Governor Hafize Gaye Erkan saying that the transition to the Turkish lira continues "in accordance with the targets." Erkan also emphasized that the "confidence in the disinflation path has increased" at the meeting.
According to a statement from TBB, the meeting addressed the reduction of foreign currency-denominated deposits in the banking system, the transition to the Turkish lira and the evaluation of practices related to rediscount and Investment-Linked Advance Credits (YTAK) within the scope of CBRT’s export and investment support.
"The positive outlook that emerged after the measures for the transition to the Turkish lira and the ongoing joint proposal work for its continuation, recommendations for the continued healthy functioning of credit flows in line with the inflation target and assessments for improving the positive trend in export and investment loans with CBRT were the main agenda items of the meeting," the statement read.
"Additionally, an agreement was reached to establish a framework for the ongoing Community Investment Note and to conduct joint work," the statement said.
Erkan, whose remarks at the meeting were included in the statement, touched upon the trend in both domestic residents’ savings instrument preferences and non-residents’ fund flows and stated "that the transition to Turkish lira continues in line with the objectives."
The report cited Erkan as reiterating that they foresee the disinflation in 2024 in line with the path announced in the last Inflation Report, as the cumulative and delayed effects of monetary policy come into play.
It also noted that the CBRT chief stated the real sector and markets’ belief in the disinflation path "has increased" and "an improvement in expectations has begun to be reflected in pricing behavior."
The pace at which consumer prices rose has started to ease after six successive months of interest rate hikes, taking borrowing costs to 40% from 8.5% after the new economy administration orchestrated a shift from a yearslong policy of low borrowing costs after the May elections.
The latest data shared by the country’s statistical authority on Monday showed that the consumer price index (CPI) rose to 61.98% last month from 61.36% in October, with so-called core inflation depicting a slowdown compared to September and October.
The core inflation, which excludes volatile food and energy costs, climbed 1.9% every month in November, from a 3.7% pace in October and 5.28% in September, the data from the Turkish Statistical Institute (TurkStat) showed.
Emphasizing the importance of determination and coordination in policies, Erkan expressed satisfaction with the banking sector’s efforts to support the transition to lira.
Alpaslan Çakar, Chairperson of the TBB Board of Directors, found the focus of monetary policy on reducing inflation very valuable and positive.
Çakar highlighted the positive results of practices that further strengthen the economy, indicating that investments and growth continue, the outlook has turned positive, predictability has increased and risk premiums have decreased.
The Turkish economy expanded by a more-than-expected 5.9% in July-September compared to a year ago, driven by household spending.
At the same time, S&P Global Ratings revised Türkiye’s long-term sovereign credit rating to positive from stable last week, citing "economic rebalancing" as the rationale for the surprise upgrade.
In addition, Çakar also noted that thanks to maintaining stability and confidence in the markets, the increase in demand for Turkish lira would support strengthening the banking sector’s contribution to financing growth through investment, employment, production and exports in a balanced and high-quality manner.