CBRT Addresses Surging Liquidity Surplus with Sterilization Measures
The Central Bank of the Republic of Turkiye (CBRT) is gearing up for significant market intervention as liquidity levels soar. According to the latest data, as of September 13, there is a liquidity surplus of TL 139.6 billion in the market. This sudden rise in excess liquidity, despite tight monetary policies, has prompted the CBRT to take action through a series of sterilization and liquidity control measures.
Liquidity Surplus at Record Levels
The recent shift in the market saw net funding turn negative on September 13, marking the beginning of the CBRT’s renewed focus on controlling liquidity. A liquidity surplus can lead to economic imbalances, and the Central Bank is committed to curbing this excess.
Key points regarding the current liquidity situation:
- Liquidity surplus: ₺139.6 billion as of September 13.
- Net funding: Has turned negative, indicating more liquidity than demand.
- Sterilization measures: CBRT is preparing to manage excess liquidity through various financial tools.
CBRT’s Strategy: Sterilization and Swap Auctions
To absorb this liquidity surplus, the CBRT is expected to use several key tools. Among the primary interventions are gold and foreign currency swap auctions. These swaps will help the Central Bank draw out excess liquidity from the market and bring the balance closer to their targeted monetary goals.
The specific steps the CBRT plans to take include:
- Gold and FX swap auctions: Designed to absorb the excess liquidity.
- Additional TL deposit auctions: Aimed at further controlling liquidity levels.
- Reserve requirement adjustments: To ensure banks hold more Turkish lira deposits, helping stabilize the market.
Tight Monetary Policy Amid Surplus
Despite the CBRT’s tight monetary policies, liquidity levels have surged. This is particularly noticeable since liquidity was almost completely withdrawn by the end of August. However, in a short period, the surplus grew, prompting immediate attention from the Central Bank.
The CBRT remains focused on its monetary transmission mechanism, which aims to strengthen the Turkish lira’s position and increase confidence in the banking sector.
Banking Sector Adjustments
In addition to liquidity management, the CBRT has made adjustments to its reserve requirements to encourage Turkish lira deposits in the banking sector. By doing so, they aim to reduce the impact of the liquidity surplus on the economy and maintain stability.
Key steps include:
- Higher TL deposit ratios: Encouraging banks to hold more lira deposits, supporting monetary policy.
- Reserve requirement adjustments: Changes in compulsory reserve levels to better control the market.
What’s Next for the CBRT?
With the liquidity surplus in full view, the CBRT is expected to continue its interventions to ensure stability in the financial system. The ongoing implementation of gold and FX swaps, along with adjustments in the banking sector, shows the CBRT’s commitment to keeping inflation in check and maintaining a stable monetary environment.
Takeaways:
- The CBRT is actively managing the TL 139.6 billion liquidity surplus.
- Tools like gold and FX swaps and deposit auctions will help curb the excess liquidity.
- The banking sector is undergoing changes to support Turkish lira deposits, reinforcing the Central Bank’s monetary goals.
Source: Dunya.com / Prepared by Irem Yildiz