Ağbal Evaluated The Price Stability

Ağbal made an assessment about price stability. CBRT Governor Ağbal gave new signals regarding price stability.

Ağbal evaluated the price stability. Governor of the Central Bank of the Republic of Turkey (CBRT) Naci Ağbal repeated his emphasis on price stability in his article published on the bank's blog. Stating that firm steps will continue towards achieving price stability, Ağbal noted that the strategy put forward is not temporary. Emphasizing that price stability is a prerequisite, Ağbal stated that permanent price stability will bring the Turkish Lira to the value it deserves. CBRT Governor Ağbal made the following statements in his article: "Trust, the only element that holds society together, also forms the basis of a strong economy. In a trusted economy, expectations improve, investment and employment increase, society attains prosperity."   Monetary Policy Focusing on Price Stability is One of the Keys to Prosperity "Trust is also of great importance for central banks, which are one of the main institutions of economic management. When confidence is trusted in monetary policy, it becomes more effective, and its power to improve expectations increases. In this context, the first step a central bank should take to achieve its goal is to make economic actors trust monetary policy. A central bank that successfully fulfills its mission opens the door to a stable and productive economy. In short, a monetary policy that gives confidence and focuses on price stability is one of the keys to social welfare in the long run. "   Emphasis on Strong and Stable Economy "As the Central Bank of the Republic of Turkey, our most important priority is to ensure price stability, which is our main duty, and to make it permanent. We are working with all our strength to achieve this goal by applying a trustworthy monetary policy and we will continue to work. Because for permanent price stability; for sustainable growth, It is a prerequisite for the welfare of the society, for a fairer distribution of income and for more employment. We will fully consolidate the strong and stable economy. Believing that a reassuring monetary policy would bring lasting price stability and a long-term prosperous economy, we set out on a new path. From the beginning of November, we went through a paradigm shift aimed at building confidence in monetary policy. All the steps we have taken since the day I became the Governor of the Central Bank were taken to support this paradigm shift in monetary policy and to build trust. With all these steps, we aim to achieve one goal: Permanent price stability. " Chairman Ağbal continued as follows: "We have taken many important steps towards this goal so far. We started by emphasizing our commitment to the aim of price stability and the inflation targeting regime. In monetary policy, we made a commitment to strengthen communication within the framework of the principles of transparency, accountability and predictability. Then, with the decisions we made in November and December, we made a strong monetary tightening due to inflation risks. In doing so, we switched to a simpler operational framework in monetary policy and announced to the public that all funding will be made on the one-week repo rate, which is the main policy tool. In addition, we switched to a simpler structure in the reserve requirement system. In January, while maintaining our tight monetary stance, we verbally guided that this stance will be maintained for a long time and additional interest rate hikes can be made if necessary. In the statements we made during this period, we have remarkably strengthened our verbal orientation by stating that it does not seem possible for us to put interest rate cuts on the agenda for a long time in the face of current inflation risks. "   Commitment to the Exchange Rate Regime "In this period, we also took steps within the framework of the principles of transparency, accountability and predictability. For example, we started to publish swap data on our website since the beginning of January. We continued this move towards increasing transparency by starting to publish the International Reserves and Foreign Exchange Liquidity chart weekly. In this context, the level between the actual/expected inflation rate path and the monetary policy interest rate path is strong. We stated that we will create by considering a disinflationary balance and we will always maintain this balance. We affirmed our commitment to the free exchange rate regime. We announced that we will not buy or sell foreign currency to determine the level or direction of the exchange rates. "   Concrete Steps to Achieve Price Stability “In the upcoming period, we will continue to take firm steps towards achieving price stability through a confidence-oriented monetary policy. We aim to reduce inflation to 9.4 percent by the end of 2021; however, we are also aware of the risks in this regard. Therefore, while maintaining our tight monetary policy, we will aim to increase the impact of our policies with an effective communication approach involving all our stakeholders. We will maintain the tight stance in monetary policy until we achieve the 5 percent target. We will not only reach the target, we will do what is necessary to ensure the permanence of this level in inflation. In summary, we would like to underline that our strategy is not temporary, but a medium term strategy and will be implemented decisively until we reach our goals. With the stabilization of capital inflows and the reversal of the dollarization trend of residents, we will increase our reserves through foreign exchange purchase auctions. When the conditions are met, we will share our plan with the public in an open and transparent way. "