Turkey's central bank confirms support for banking sector growth amid economic stabilization efforts
Date
5/26/2024 6:06:25 AM
(MENAFN) Turkish Central bank Governor Fatih Kara Khan emphasized on Friday the continuation of monetary policies aimed at bolstering the growth of the banking sector within the country. Speaking at the Arab International Banking Summit in Istanbul, Khan noted a significant increase in the share of deposits denominated in Turkish lira, which rose from its lowest point of 31 percent in August last year to 45 percent. He highlighted the evolving landscape wherein banks are expected to take on a greater responsibility in managing their balance sheets as conditions begin to stabilize.
The Turkish Central Bank recently opted to maintain key interest rates at 50 percent for the second consecutive month, signaling confidence in the existing monetary policy framework. This decision precedes an anticipated peak in inflation, expected to reach around 75 percent. While economists surveyed by Reuters widely anticipated the central bank to hold interest rates steady, the institution emphasized its readiness to tighten monetary policy further should significant and sustained inflationary pressures emerge.
Despite persistently high inflation, among the fastest globally, Turkish central bank officials foresee a gradual decline in inflation starting from the upcoming month, with projections suggesting a year-end rate of 38 percent. Notably, the Turkish Central Bank has undertaken substantial interest rate hikes totaling 4,150 basis points (equivalent to 41.5 percent) since June 2023. However, the bank opted to maintain rates at 50 percent in April, allowing time for the impact of its previous policy tightening measures, including a 500 basis point increase in March, to materialize.
The central bank's commitment to supporting the banking sector's growth amidst ongoing efforts to stabilize the economy underscores its proactive approach to addressing challenges and fostering financial resilience. As Turkey navigates economic complexities, the central bank remains vigilant, ensuring that monetary policies remain conducive to sustainable growth and stability within the banking sector and the broader economy.
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