Turkish central bank raised reserve requirement ratios for Turkish lira deposits and changed the ratio for lira-denominated required reserves that should be maintained for foreign currency deposits, it said on Saturday.
The reserve requirement ratio for short-term lira deposits will rise to 15% from 12%, and will increase to 10% from 8% for long-term lira deposits, the Central Bank of the Republic of Türkiye (CBRT) said in a statement.
Meanwhile, the reserve requirement ratio for foreign currency deposits that can be kept as lira was cut to 5% from 8%, it added.
The central bank also raised the maximum commission rate applied, based on the level of the transition-to-lira rate, to 8% from 5%. In addition, the remuneration of required reserves that should be maintained for lira deposits will no longer be conditional on the transition-to-lira rate, according to the statement.
The mentioned steps were taken “to support macrofinancial stability and the monetary transmission mechanism,” the central bank said.
The moves on reserve requirements came shortly after the central bank decided to keep its key policy rate unchanged at 50% for the sixth straight month on Thursday, signaling a shift from further tightening.
The decision of the monetary authority to raise the ratios, which represent the portion of reservable liabilities that commercial banks must hold on to rather than lend out or invest, usually comes in case of excess liquidity in the market.
The central bank on Thursday signaled it would continue to use so-called “sterilization tools,” saying that “liquidity conditions are assessed with respect to prospective developments and closely monitored.”
The bank said the new ratios will be applied as of Sept. 27, 2024.
Prior to an extended pause, the CBRT has hiked the key policy rate from 8.5% in June last year to 50% this March, in a bid to tackle elevated inflation.
The annual inflation rate dropped to below 52% in August, and is expected to continue a downward trend in the upcoming months, raising the prospects of rate cuts.
Some major international financial institutions, in their assessment following the bank’s last committee meeting, suggested they expected the first cut in November.
The CBRT, however, pledged that the “tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed, and inflation expectations converge to the projected forecast range.”
The next inflation data is due to be announced on Oct. 3, the same date the CBRT Governor Fatih Karahan is expected to hold a presentation in Parliament, according to an Anadolu Agency (AA) report on Friday.
Moving from the pledge to tighten further if needed, the CBRT said on Thursday monetary policy tools “will be used effectively” in case a significant and persistent deterioration in inflation is foreseen.
