Turkey: Central Bank Sticks To Policy Plan
Turkey's central bank met after May's election and kept policy rate at 8.50%. This was expected by the market. They also believe this rate will help the country recover from recent earthquakes. The decision did not have much effect on the USD/TRY exchange rate.
CBT tightened security maintenance requirements for loans after the elections. These requirements were expanded to include commercial and consumer loans. However, this was reversed before the election run-off. Liraisation regulations and increased controls over banks' daily FX transactions remain in place. The market closely watched for any signal of policy change or renewed forward guidance from CBT in this environment.
CBT's evaluation this month was almost the same as the one in April.
Most people agree that the way monetary policy is carried out needs to become more normal, since reserves are under a lot of pressure and have gone down by $22.1bn this year. The current level of reserves is now $105.1bn, as of 12 May. It's important to keep an eye on whether the new administration will change the model of the economy after the second round of the presidential elections. That will be a crucial issue for people who are watching the Turkish economy.
