Central bank to be more cautious in 2007
Posted by meb at January 23rd, 2007
The Central Bank of Turkey (TCMB) will pursue a more cautious and conservative monetary policy, hinted TCMB Governor Durmuş Yılmaz in an open letter to the government in which he detailed the reasons for inflation problems last year.
Yılmaz also signaled that monetary policies would be more sensitive to negative developments that may have adverse effects on the targets. “This approach must be understood as an indication of our decisiveness to reach our middle-term inflation targets,” said Yılmaz in the letter. Undersigned by Yılmaz and central bank Vice Governor Erdem Başçı, the open letter, written in accordance with Article 42 of central bank laws, was sent to Economy Minister Ali Babacan and the International Monetray Fund (IMF). The cumulative effects of the supply-side shocks and exchange rate movements in 2006 caused inflation to be higher than targeted, said the letter: “It has to be stated that a prudent monetary policy is a necessary condition, but that is not sufficient to reach price stability. A high primary surplus has played a vital role for success in the struggle against high inflation,” said the letter. It was further emphasized that continuing success required the financial system harmonizing with the EU and stronger discipline within the financial system.
source: www.todayszaman.com
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