Financial conditions, conceptually, summarizes whether financial indicators such as interest rates, exchange rates, asset prices and credit conditions are being restrictive or accommodative on economic activity.
It is observed that central banks are willing to normalize their policies. Nevertheless, growth and employment developments worldwide, except for the USA, are not favorable enough to allow normalization at the moment.
We observe that global liquidity has an impact on the magnitude of interest rate transmission. Yet, financial regulation is strengthened on a global scale and macroprudential policies are implemented in a broader spectrum, which may have weakened this impact.
The Turkish lira liquidity demanded by banks from the Central Bank is determined according to the funding need of the system and the types of assets accepted as collateral for Turkish lira (TL) liquidity facilities of the CBRT do not determine the funding need of the system.
The Fed started its balance sheet reduction program in the last quarter of 2017 and publicly announced its pace as well as its method. However, it did not make any commitment on the extent and deadline of this reduction. Following the recent slowdown in global growth, the Fed also suspended its policy normalization and announced that it would end the balance sheet reduction in September 2019 accordingly.In this note, we summarize that framework and evaluate its implications in terms of the balance sheet normalization.
In times of an elevated exchange rate risk, the demand for currency increases due to the hedging motive, which leads to a surge in both the level and the volatility in the currency swap market and the spot market.
A holistic approach incorporating joint efforts of all stakeholders in the disinflation process can ease the policy trade-offs and thus make a significant contribution to achievement of lasting price stability at lower costs.
When the exchange rate effect is ignored, the fluctuation in the money supply may seem larger than it actually is in periods of substantial changes in exchange rates, producing misleading signals. Monitoring high-frequency money supply developments in both exchange rate-adjusted and non-exchange-rate-adjusted terms may be a better idea in economies with a high share of FX deposits in the money supply.
Uğur Namık Küçük,İbrahim Ethem Güney,Doruk Küçüksaraç
The TL-Settled Forward Foreign Exchange Auctions are expected to support the corporate sector’s exchange rate risk management capacity by facilitating access to a simple, deep and efficient hedging instrument.
Ali Hakan Kara,Fethi Öğünç,Çağrı Sarıkaya,Mustafa Utku Özmen
The degree of exchange rate pass-through to inflation may vary depending on the economic environment. Currently, the weak economic activity is limiting the exchange rate pass-through, whereas the behavior of exchange rate expectations pose upward risks.