Central Bank takes action to back financial stability

Dünya Executive - - OVERVIEW -

The Central Bank of Turkey (CBRT) on May 9 changed reserve requiremen­t ratios to support the stability in financial markets. “The upper limit for the FX maintenanc­e facility within the reserve options mechanism has been lowered from 40 percent to 30 percent,” the CBRT said. Since the beginning of May, the USD/TRY exchange rate has been experienci­ng harsh fluctuatio­ns. The exchange rate stood at nearly 6.25 as of 5 p.m. (1400GMT) on May 9, while the average USD/TRY was around 5.75 last month. “With the revision in FX maintenanc­e facility within the reserve options mechanism, $2.8 billion of FX liquidity will be provided to the market. “Whereas TRY 7.2 billion will be withdrawn,” the Bank said. In the same statement, the CBRT also said reserve requiremen­t ratios for FX liabilitie­s have been increased by 100 basis points for all maturity brackets.” As a result of the increase in FX reserve requiremen­t ratios, $3 billion of FX liquidity will be withdrawn from the market,” it said. Early May 9, the bank also decided to suspend the one-week repo auctions for a period of time to restrain the continuing depreciati­on of the lira. The CBRT’s decision means around 150 basis points “indirect rise” in interest rates, while the Bank’s one-week repo rate – its policy rate - continued to stand at 24 percent.

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