The Turkish Central Bank will ensure the strength and credibility of the Turkish lira with the determination of its fight against inflation, the bank’s new governor said on Tuesday.

“We will continue to use all the tools we have, independently and effectively,” Sahap Kavcioglu said during an ordinary general assembly of bank officials.

Kavcioglu, who was appointed to the post on March 20, said the current high levels of inflation and expectations require tight monetary policy.

 Following his remarks, the Turkish lira gained ground against the US dollar, reaching 8.28 at 15.53 (GMT1253) after seeing 8.46 earlier.

He also stressed that the bank aims to achieve a lasting lower rate of inflation and that the one-week benchmark repo rate will continue to be the bank’s main monetary policy tool.

The bank will continue to set the policy rate at a level above inflation, preserving the strong disinflationary effect, until there are strong indicators that point to a permanent fall in inflation, he underlined.

“I am aware that the low-inflation environment we target is a prerequisite for sustainable growth and employment growth,” he stressed, adding that the bank’s 5% inflation target will be reached with the awareness of institutionalism and a strong capacity for analysis.

April cut rate should not be taken for granted

Kavcioglu explained: “We should not forget that stability achieved in the general level of prices, a fall in country risk premiums, the start of reverse currency substitution, rising foreign exchange reserves, and a permanent decline in financing costs will positively affect economic and financial stability.”

Thus, he added, suitable groundwork will be laid for a continued rise in investment, production, and employment in a healthy and sustainable manner.

Speaking to Bloomberg on Monday, Kavcioglu said: “I do not approve a prejudiced approach to MPC [Monetary Policy Committee] decisions in April or the following months, that a rate cut will be delivered immediately,”

“All in all, monetary policy decisions are made by the Monetary Policy Committee in view of the available information and data set regarding macroeconomic developments,” he stressed.

 He added: “In the new period, we will continue to make our decisions with a corporate monetary policy perspective to ensure a permanent fall in inflation. In this respect, we will also monitor the effects of the policy steps taken so far.”

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