IMF warns of Tur­key’s in­fla­tion risks

The Pak Banker - - Front Page -


The In­ter­na­tional Mone­tary Fund warned Tur­key on Wed­nes­day of in­fla­tion risks that could dam­age over­all growth in the econ­omy. In a gen­er­ally pos­i­tive re­port fol­low­ing reg­u­lar con­sul­ta­tions with Turk­ish au­thor­i­ties, IMF ex­ec­u­tive board mem­bers praised them “for set­ting the stage for more sus­tain­able and bal­anced growth in 2012, ac­com­pa­nied by de­clines in the cur­rent ac­count deficit and in­fla­tion”.

But the IMF di­rec­tors noted that Turk­ish in­fla­tion re­mained above tar­get and in­fla­tion ex­pec­ta­tions were still el­e­vated. “Di­rec­tors rec­om­mended that the cen­tral bank adopt a more for­ward-look­ing mone­tary pol­icy stance and closely mon­i­tor developments in do­mes­tic de­mand, wages, and cap­i­tal flows,” the IMF said in a state­ment af­ter the Ar­ti­cle IV con­sul­ta­tions.

Many di­rec­tors sug­gested that the cen­tral bank re­turn to an in­ter­est rate pol­icy un­der a con­ven­tional in­fla­tion-tar­get­ing frame­work. Still, a num­ber of them thought that, in the cur­rent en­vi­ron­ment of volatile cap­i­tal flows, the more flex­i­ble pol­icy frame­work had served the Turk­ish econ­omy well.

“In or­der to man­age risks from ex­ces­sive short-term cap­i­tal in­flows, many di­rec­tors saw scope for greater use of ster­ilised in­ter­ven­tion, given the rel­a­tively low level of in­ter­na­tional re­serves, com­ple­mented with macro-pru­den­tial mea­sures,” the IMF said.

In ster­ilised in­ter­ven­tion, mone­tary au­thor­i­ties counter un­favourable for­eign-ex­change rates by off­set­ting the pur­chase or sale of do­mes­tic as­sets.

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