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The gross foreign exchange reserves of the Central Bank of the Republic of Türkiye (CBRT) have recovered to levels seen before the volatility in March after the arrest of the Istanbul mayor.
The reserves reached $171.9 billion as of July 25, according to a presentation by CBRT Governor Fatih Karahan in the central province of Kayseri on Monday, citing the positive impact of a tight monetary policy stance.
Gross reserves stood at $171.1 billion on March 14, before the detention of Istanbul Mayor Ekrem Imamoğlu on March 19. Imamoğlu was jailed pending trial over graft charges.
Karahan’s presentation showed that net reserves excluding swaps stood at $46.7 billion on July 25, compared with $65.6 billion on March 14.
Following the volatility after Imamoğlu’s arrest, the central bank hiked its key policy rate to 46% from 42.5% in April, reversing an easing cycle that had begun in December, to help stabilize markets.
Treasury and Finance Minister Şimşek on Sunday said the economy has returned to a “positive cycle” after market turbulence in March.
The CBRT last week returned to its easing cycle as it cut its benchmark interest rate by a larger-than-expected 300 basis points to 43%, as disinflation continues.
Going forward, the bank said it would determine the “step size” of future monetary easing “prudently” and on a meeting-to-meeting basis. It also lowered the upper band of its rate corridor to 46% from 49%.
On Monday, Karahan emphasized that the tight policy stance would be maintained until price stability is achieved, adding that the disinflation process will be supported through demand rebalancing, real appreciation of the Turkish lira and improvement in inflation expectations.
He also said that the coordination of fiscal policy will contribute to this process.
Karahan’s presentation said the steps to be taken regarding the policy rate would be determined in a way that ensures the tightness required by the projected disinflation, taking into account actual inflation outcomes, its underlying trend and expectations.
“The size of the steps will be reviewed with a cautious approach, focused on the inflation outlook and on a meeting-by-meeting basis. In the event of a significant and persistent deterioration in inflation, all monetary policy tools will be used effectively,” the presentation said.
Turkish annual consumer price inflation slowed to 35% in June, extending its fall from a peak of around 75% in May 2024. The central bank’s year-end inflation midpoint estimate currently stands at 24%, in a forecast range of 19% to 29%.
Last week, the bank said the underlying inflation trend remained flat in June and it anticipated a “temporary rise” in monthly inflation this month due to one-off factors.
