Inflation letter from the CBRT to the government

The Central Bank of the Republic of Turkey (CBRT) sent a letter to the government explaining that inflation was above the target range in 2022.

The Central Bank of the Republic of Turkey used the following words in the letter to the government:

Pursuant to the 42nd element of the Central Bank Law No. 1211, the inflation target
in case of failure, the Central Bank of the Republic of Turkey (CBRT)
to inform the Government in writing of the reasons and the measures to be taken, and to make it available to the public.
explanation is required. Inflation in 2022 was above the target range. It
In this framework, the first Inflation of 2023, which explains the reasons for the deviation of inflation from the target,
The Money for 2023 report, which summarizes the monetary policy to be implemented to achieve the inflation goal,
We present the texts of the Policy and Liraization Strategy in the appendix for your information.
A comprehensive review process of all policy instruments of the CBRT in 2022
has been carried out. Liraization Strategy, which is the integrated policy framework of the CBRT, has steps to be taken.
based on impact analysis. Permanent price stability of the implemented strategy
Structural increase in the weight of the Turkish lira in the financial system, which are two prerequisites for
It has had supportive effects in terms of building excess capacity.
CBRT reserves strengthened with diversified reserve resources, high energy
global reserve losses due to prices and financial volatility.
although it has increased. Through the capitalized use of country currency swap settlements
As trade in local currency becomes widespread, foreign exchange markets have a more stable structure in the long term.
Significant progress has been observed in the direction of Liraising the active reserve policy
A strong upward trend in the Turkish lira share in deposits as a result of
has taken place.

The rate of growth of loans by targeted credit, liquidity, provisions and collateral policies,
It has had valuable effects in terms of its composition and meeting with economic activity. Russia-Ukraine
The sudden increase in credit growth after the war was brought under control,
The share of commercial, SME, investment and export loans in its composition reached historical high levels.
reached. Financing against the risks posed by the weakening process in global economic activity
It was ensured that investment and current surplus capacity were supported through the suitability of costs.
Commercial loan and bond interests, which rose with the effect of the war, increased significantly with the active measures taken.
has regressed. Thus, the strengthening of cash transfer was ensured. As a result of all this,
Excluding the effects of energy prices, the current surplus capacity was developed in 2022.
Structural problems in front of permanent price stability with the active policies implemented.
Valuable gains have been made in the elimination of it. In addition, the policies in question
With the positive results being seen and the relative stability of global power prices,
However, a gradual slowdown in inflation started in the second half of the year.
The slowdown in monthly inflation rates led to headline and core inflation, inflation spillovers and
This led to significant declines in expectations and main trend indicators.
In 2023, the CBRT will implement the Liraization Strategy with all its elements as data-oriented and effective.
will continue to implement and develop it with determination based on its analysis. in deposit
increasing the liraization rate to 60 percent with the prestige of the first half of the year and
It is aimed to continue the increase in liraization process. Collateral, funding and
The possibilities of using credit channels will be calibrated in line with liraization purposes. Turkish
By making the Open Market Processes the main element of the funding channel in the TL liquidity management,
The share of the funding made through this channel will be increased gradually. The growth rate of loans and
It will be ensured that its composition is compatible with the inflation path envisaged in 2023.
The loans will support activities that increase investment, employment, production, exports and current account surplus.
The purposeful loan understanding, which envisages the use of the system, will be strengthened and implemented. Reserve
resources will continue to be diversified and CBRT reserves will continue to be increased. Policy
free market framework, supply and demand in foreign exchange markets in a healthy and stable stability.
conditions are expected to contribute to its formation.

Liraization, which was developed by the CBRT with the aim of establishing price stability permanently.
It will continue to implement its strategy with determination. Within the framework of the Turkish Economic Model
on the basis of the high coordination created, the annual rate of increase in consumer prices
will be reduced to a level consistent with its predictions.