Central Bank will continue to build up reserves in 2024

ANKARA

The Central Bank has said that it will maintain its reserve build-up strategy and ensure continuation of the stable uptrend in international reserves in 2024.

In its Monetary Policy for 2024, unveiled on Dec. 29, the bank stressed that it has no commitment to any exchange rate level and will not conduct FX buying or selling transactions to determine the level or direction of exchange rates.

The bank’s international reserves climbed to a new record level of $145.5 billion on Dec. 22.

Foreign exchange reserves increased from $95.4 billion on Dec. 15 to $97.6 billion on Dec. 22, while gold reserves rose from $47.1 billion to $47.9 billion, the data from the bank showed on Dec. 28.

The bank also said that it was maintaining its medium-term inflation target of 5 percent.

“Financial stability will also be safeguarded as a supporting factor for price stability,” it said, adding that the monetary policy will be formulated to bring inflation to this target in the medium-term.

The bank anticipates that demand for FX-protected deposits (KKM) will continue to fall while demand for Turkish Lira assets will increase in 2024 “with the market mechanism functioning more effectively, exchange rates remaining stable, and the disinflation process becoming more evident.”

Foreign investors kept pouring money into Turkish equities and bonds last week.

Foreign investors scooped a net of $140 million of Turkish equities and $33.9 million of government bonds in the week ending Dec. 22, the data from the bank showed on Dec. 28.

Cumulative inflows into Turkish equities have amounted to $1.9 billion, while foreigners have also bought $1.5 billion of government bonds in the past eight weeks.

In the policy document, the bank also said that it aims to increase the share of lira deposits to 50 percent in the banking system and to sustain the fall in the KKM balance in 2024 through steps prioritizing lira deposits.

The Monetary Policy Committee (MPC) would convene 12 times in 2024, said the bank, reiterating that it would continue to use liquidity management instruments to ensure the efficiency of the monetary transmission mechanism.

The first rate-setting meeting will take place on Jan. 5, 2024.

Since June, the bank has raised the policy rate - the one-week repo auction rate - by a cumulative 3,400 basis points to 42.5 percent.