Inflation will continue to rise until June, reflecting base effect, the government of Central Bank, Erdem Basci, said in a presentation.
Positive impact of tightening on inflation will be seen later, according to Basci who also expects domestic demand to lose momentum but exports to contribute to final demand. Loan growth has slowed as a result of tight monetary policies, macroprudential measures and weak capital flows, Basci said. The governor also expects a significant improvement in the current account deficit this year.
This week, the Central Bank said in the minutes of the last Monetary Policy Committee meeting there is a risk of a marked slowdown in economic activity. If this risk materialises, reserve requirements, reserve option mechanism and liquidity policies may be utilized, if needed, the Bank noted. The MPC also evaluated the possibility of paying interest to the portion of reserve requirements held in TRY, in the context of the normalization of monetary policy, the Bank said.
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