March 4, 2020 / 5:13 PM / in a month

Turkish cenbank appears poised to stem consumer loans -investors

ISTANBUL, March 4 (Reuters) - Turkey’s central bank might soon use macroprudential tools to put a brake on rising consumer loan supply, according to three participants in meetings held Wednesday between the bank and investors.

Consumer loans, up more than 30% as of the end of January, could boost inflation and imports and in turn weigh on Turkey’s current account balance. The central bank and the government, on the other hand, expect inflation to dip through this year.

“We got the impression that the central bank might take macroprudential measures regarding loan growth and composition,” one of the participants said.

“We think the measures might discourage consumer loans via an adjustment to required reserves. We have seen similar steps in the past,” the person said.

The central bank declined to comment. Since July, the bank has aggressively cut its key policy rate to boost a recovery from recession, and has increasingly turned to reserves as another tool to manage economic growth.

In February, two sources told Reuters the central bank is planning to adjust its required reserve guidelines for banks in order to stem a rise in consumer loans.

Last week, the bank said it was assessing macroprudential measures addressing credit growth, and that its composition might be reviewed to safeguard a welcome rebalancing of the current account since a 2018 currency crisis.

Turkish consumer inflation stood at 12.37% year-over-year in February. The central bank forecasts that it will drop to 8.2% by year end. (Writing by Ezgi Erkoyun; Editing by Jonathan Spicer)

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