Turkey has increased the proportion of deposits banks must store with the central bank, in a move that will soak up some of the liquidity provided since the crisis. The required reserve ratio has increased from 5 to 5.5 per cent for lira-denominated deposits and from 10 to 11 per cent for deposits in foreign currency.
Turkey has not started raising rates since the crisis. Last week, the one-week repo (policy) rate was kept constant at 7 per cent, but overnight borrowing and lending rates were cut 25bp.
The central bank raised the foreign currency reserve requirement to 11 percent from 10 percent, according to a directive in the Official Gazette published in Ankara today. It also increased the requirement for lira reserves to 5.5 percent from 5 percent.
The decision means the bank has completely reversed the 2 percentage-point cut it made in the foreign currency reserve requirement in December 2008. The requirement for lira reserves before the crisis was 6 percent.