We don’t know the CBT’s estimations of credit growth rate under different scenarios on external conditions.

Inflation reports are among the key communication tools of the Central Bank of Turkey (CBT). Here is a quote from the second one for 2012: “Having achieved the desired outcomes with respect to alleviating macro financial risks, monetary policy has focused on maintaining price stability as of October 2011” (page 3).

The sentence tells us that before October 2011 the CBT concentrated mainly on policies to alleviate macro financial risks. Previous inflation reports indicated that the mentioned policy package was put into effect in the late 2010. So, we are talking about a policy package employed for almost a year.

As I stressed on Saturday’s column, this series is not devoted to criticize this monetary policy tool in effect. I have done that that before and will continue doing so. For the purpose of this series, however, I take the current policy framework as given and follow from the fact that a policy should be well communicated to obtain better results. In this context, I am interested in the ways to make the new policy more transparent.

Concerning the inflation reports for the period when macro financial stability was prioritized over price stability, we observe that particularly in terms of estimations and future policy prospects, the reports imply as if the CBT was concerned solely with price stability. The sections on prospects (the late section in particular) consist of statements, figures and tables we are familiar with from the inflation targeting era. These sections discuss potential developments about inflation performance and the steps the CBT can take in this context.

Credit growth rate

For instance, the section on macro financial stability conveys that the CBT works to control the credit growth rate, but the section on economic prospects don’t have any analysis on credit growth as comprehensive as that on inflation prospects.

For instance, we don’t know the CBT’s credit growth estimations under different scenarios on external conditions. We don’t know the steps it will take to manipulate credit growth in line with its targets either. Yes, we have an idea of it based on separate statements or expressions scattered throughout the report. But the most important section of the report that discusses prospects does not offer a compact analysis with illustrative figures, charts and comments.

Besides, credit growth rate is not the only variable the CBT focuses on in the context of macro financial stability. As officials stated previously, ht CBT is concerned also with current account deficit and real exchange rate and Inflation reports lack comprehensive analyses on these as well. Anyways, I will cut it here as I think I made my point clear.

This commentary was published in Radikal daily on 27.11.2012