Central Bank targets 5 percent inflation rate in 2022

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Releasing its Monetary and Exchange Rate Policy for 2022 yesterday (December 29), the Central Bank maintained the medium-term inflation target of 5 percent.

The monetary policy will be designed to reach this target gradually, the bank said.

Next year, it will continue to implement the inflation targeting regime for ensuring price stability and the bank's main policy instrument will continue to be the one-week repo auction rate, the bank stressed.

The bank underlined that it will continue to implement the floating exchange rate regime, and that free-market conditions will continue to determine exchange rates.

NOTE: According to the Turkish Statistical Institute (TurkStat), the monthly inflation rate was 3.51 percent and the annual inflation rate was 21.31 percent in November. The Inflation Research Group (ENAG), an independent group of economists, announced the monthly inflation rate as 9.9 and the annual inflation rate as 58.65 percent for November. The official inflation rate for December will be announced on January 3.

The Central Bank said it will continue to strengthen its foreign exchange reserves, increasing reserves in 2022 as long as market conditions are suitable.

It will use reserve requirements as a supporting instrument for price stability and financial stability objectives, it said and noted: "In this framework, the Reserve Options Mechanism will be completely terminated in 2022, and costs of foreign currency liabilities will be increased while mechanisms to promote Turkish lira deposits will be prioritized."

The bank stated that it will continue to use the policy instruments effectively to safeguard financial stability. (HA/VK)