Turkish central bank governor Kavcioglu pledged to senior members of the Banks’ Association of Turkey on Tuesday to take necessary steps to protect the lira’s value in a meeting with senior bankers, according to a person with direct knowledge of the matter.
He was referring to new swap deals and not rate hikes. The Governor said that the Turkish central bank was is in talks with four counterparts for new swap deals.
The governor also added that the central bank may tweak the required reserves rule after consultations with banks in order to boost the credibility of the lira, the person said.
The central bank declined to comment on what was discussed at the meeting.
Turkey is close to an agreement with Azerbaijan while negotiating a swap deal with several countries, Reuters reported, citing sources in knowledge of the matter. Other countries Turkey is reportedly negotiating with on the swap deal include Malaysia, South Korea, Russia, the UK and other Asian countries. A source also said it was possible to extend the existing swap agreement with Qatar.
The lira has weakened more than 15% against the dollar since the governor took office in March, even though he’s pledged to work toward a positive real rate when adjusted for realized and expected inflation, and to maintain tight policy until the bank’s 5% inflation target is achieved.
The central bank under Kavcioglu kept interest rates unchanged for a third meeting this month at 19%.