As a matter of fact, the Central Bank explains, via Inflation Reports and other policy instruments, why and how the monetary policy stance has been reviewed. The main policy instrument of the Central Bank is short-term interest rates. The implementation and communication of the monetary policy decisions in the inflation-targeting regime will continue to be carried out through short-term interest rates. Moreover, as stated in previous policy documents, instruments such as reserve requirements or efficient liquidity management might be used, when deemed necessary. The decision-making process and communication The Monetary Policy Committee (the Committee) will continue to meet once a month in 2008 as well. Meetings will be held according to the previously set calendar and start at 13.00. After making a decision, summary of the decision and its rationale will be posted on the website of the Bank in a press release at 19.00 on the same day. English translation of the decision will be posted on the website on the same day. To enhance the communication of monetary policy decisions, “Summary of the Monetary Policy Committee Meeting” will continue to be posted in both Turkish and English on the Bank’s website within eight working days following the meeting. The Inflation Report, which is the main communication tool of the monetary policy, will continue to be published quarterly, and the general evaluation of the Report will be presented to the public with a press conference. The Financial Stability Report will be published twice a year 1 .
In case of an accelerated credit expansion in the banking system in such an extent that would create inflationary pressure despite the active use of the said open market operations to drain the excess liquidity in the market, required reserves may also be used effectively to support liquidity management. The Central Bank, the primary goal of which, entrusted to it by law, is to achieve and maintain price stability, will continue its practices to enhance the effectiveness of the monetary policy and liquidity management, also in 2008. Accordingly, the Central Bank may change not only its liquidity management strategy, but also the borrowing and lending interest rate margins in cases of unpredictable changes in market conditions and emergence of needs that may arise. As always pointed out, the Central Bank deems the stability and development of financial markets as a supportive objective for the efficient implementation of the policies pertaining to price stability. Obviously, under the floating exchange rate regime, the Central Bank is able to implement the YTL liquidity policy in a more flexible manner than it can under a fixed currency peg regime and can act more promptly and flexibly to meet the YTL liquidity needs of the banking system. Also, the Central Bank can prevent excessive fluctuations in money market interest rates as long as they are consistent with the inflation target. Furthermore, the Central Bank provides the banking system with foreign exchange liquidity via short-term foreign exchange deposit auctions, albeit at limited amounts.