The liraization of the financial system is the focus of the Turkish central bank’s continuing review of its policy framework, its governor said on Tuesday.
“The focus of all applications to be put into operation will be to ensure the liraization of the financial system in order to reshape price stability on a sustainable basis,” Şahap Kavcıoğlu told the bank’s annual general meeting.
The Central Bank of the Republic of Turkey (CBRT) earlier affirmed that its comprehensive review of the policy framework was being conducted with the aim of encouraging “permanent liraization” in all of its policy tools.
The bank held its key policy rate steady at 14% in three meetings this year and said measures and policy steps will prioritize liraization in the market.
Kavcıoğlu said geopolitical developments will have a limited impact on exports.
He said effects such as temporary pricing factors, increases in global energy, food and agricultural commodity prices and disruptions in supply processes were effective in the rise in inflation.
"The energy cost increases caused by the recent hot conflict environment also play an important role," he noted.
Kavcıoğlu reiterated the expectations that the disinflation process would start on the back of measures taken and decisively pursued sustainable price and financial stability along with the decline in inflation owing to the base effect and the resolution of the ongoing regional conflict.
Turkey’s annual inflation jumped more than expected to a two-decade high of 54.4% in February.
Inflation has surged since last fall amid soaring global commodity and energy prices and as the lira weakened after the central bank in September embarked on an easing cycle, which saw its policy rate being slashed by 500 basis points.
The policy easing came as the government endorses a new economic program that prioritizes low borrowing costs.
The government has said inflation will fall with the program, which looks to boost production and exports and aims to achieve a current account surplus. Government officials have said inflation will fall to single digits next year.
Turkey’s energy bill also surged last year as global prices and demand rose, leading Ankara to hike energy prices at the start of the year.
To help offset the burden, the government announced a 50% hike in the minimum wage for this year.
