Financial Stability Committee keeps eye on global inflation

ANKARA

The Financial Stability Committee convened to discuss the impacts of global inflation and commodity prices on Türkiye’s macroeconomic indicator as well as the latest developments in the banking industry, it said in a statement.

The committee members met for a fifth time on July 25, chaired by Treasury and Finance Minister Nurettin Nebati, to assess the effects of global economic developments on the country’s financial system.

The statement, issued by the Treasury and Finance Ministry, added that the committee also discussed the effects of the global monetary tightening on developing nations.

Türkiye’s Central Bank last week kept its policy rate (one-week repo rate) unchanged at 14 percent. The annual inflation rate quickened from 73.5 percent in May to 78.6 percent in June, when consumer prices advanced 4.95 percent monthly.

The monetary authority delivered its last interest rate change in December 2021, when it cut the policy rate by 100 basis points from 15 percent to 14 percent.

The U.S Federal Reserve is holding its two-day policy meeting this week, where it is expected to hike the benchmark borrowing rate on July 27 by another three-quarters of a percentage point in its aggressive campaign to cool demand and ease price pressures.

The European Central Bank (ECB), on the other hand, on July 21 brought an end to the era of negative interest rates in the eurozone with a bigger than expected half-point hike to combat soaring inflation.

The more aggressive move, the ECB’s first rate hike since 2011, reflected an updated “assessment of inflation risks,” the ECB said.

‘Banking sector resilient’

The latest developments in the country’s insurance and banking sectors were also discussed, according to the statement issued by the Finance Ministry.

“The main indicators of the Turkish banking industry remain strong and the contributions of the insurance sector and capital markets to the economy continues,” it said.

The committee assessed the impacts of the macroprudential policies on credit markets and access to financing, the statement added.

The banking sector’s profit was 132 billion Turkish Liras in January-May, data from the Banking Regulation and Supervision Agency (BDDK) showed, surging from the industry’s combined net profit of 24.7 billion liras a year ago.

The capital adequacy ratio in the industry was 18.15 percent, while the non-performing loans/total loans ratio was 2.61 percent as of end May.

“The committee will continue to ensure that its members act in cooperation and collaboration in taking the necessary steps within the policy framework,” the statement concluded.