CB Governor: Turkey will stand stable despite unglobal certainties

Turkish Central Bank Gov Erdem Başçı pledges a stronger year in terms of stability and predictability, but cannot avoid speaking of increasing global concerns and volatilities. Başçı also says he is against relocating the headquarters of the Central Bank to Istanbul

Big uncertainties will mark the global economy in the new year, according to Central Bank Gov. Erdem Başçı, who said Turkey’s monetary policy would maintain flexibility while increasing predictability.

“This will be a year in which policy flexibility remains and policy predictability increases rapidly [for Turkey],” Başçı said during a meeting with journalists in Ankara.

Başçı said the bank would track financial stability in 2012. “We will not only focus on price stability but also go on with ensuring financial stability.”

Noting the bank’s inflation projection for the next three years stood at 5 percent, the governor said the rate may exceed 10 percent in December. 

“Core inflation is expected to decline after peaking in January next year. Headline inflation will fall back to single digits starting from May,” Başçı said. The October tightening in loan growth has been “very effective,” he added.

According to the governor, high inflation was a temporary one. “It is the price of a soft landing” as the Turkish economy grew 8.2 percent in the third quarter.

No briefings

The bank has decided to cancel monthly briefings with chief economists and general managers of lenders, introduced for the first time earlier this year. However, the bank will accept more requests from analysts for individual meetings with senior officials, said Başçı.

“In general, the Central Bank’s 2012 monetary policy outlook did not provide any surprise for financial markets,” said Özgür Altuğ, chief economist at BGC Partners, in an email statement yesterday.“We sense the bank realized the fact visibility in financial markets has been quite low because of the EU debt crisis and central bank’s monetary policy flexibility,” Altuğ said.

“Consequently, we observe the bank will put great importance on communication in next year, but the cancelation of monthly investor conferences might be perceived as negative in terms of communication.”

The governor also said the bank would replace 4.3 billion liras of bond maturing in its portfolio next year by buying bonds from the market via auctions.

The bank has no plan “for the time being” regarding any other bond purchases next year, Başçı said. It will help markets and lenders make plans ahead by offering lending in liras and foreign currencies over one month, in addition to week-long auctions.

The bank will set a target for the amount of dollars the bank sells in daily auctions at the monthly monetary policy meeting, added Başçı.

Earlier this week the bank also limited daily dollar auctions to $1.35 billion in extreme conditions, not to exceed $1.7 billion two days in a row. It also said it projects to sell $50 million a day under normal conditions.

In accordance, the bank sold $50 million for liras, after getting $264 million of bids from lenders in an auction yesterday.

28.12.2011
SOURCE: HDN