February 13, 2020 / 3:05 PM / 7 days ago

Turkish cenbank to stem consumer loans with reserve tweak -sources

ISTANBUL, Feb 13 (Reuters) - Turkey’s central bank is planning to adjust its required reserve guidelines for banks in order to stem a rise in consumer loans and keep a lid on some imports, two sources told Reuters on Thursday.

Rising consumer loans, up 34% from last year, could boost inflation and imports, which in turn would cause Turkey’s current account balance to deteriorate. The central bank and the government expect inflation to dip through this year.

The central bank, which has aggressively cut its key policy rate to boost Turkey’s recovery from recession, has increasingly turned to reserves as another tool to manage economic growth and consumer prices.

In December, it effectively raised the ceiling on loan growth targets needed for lenders to qualify for lower required reserve ratios, while introducing regulations that aimed to channel loans to production-oriented sectors.

The central bank’s planned move to curb consumer loans is not intended to limit economic growth, and is seen by authorities as a “macroprudential measure,” said the two sources, who requested anonymity to discuss the plan.

One said the combination of demand, pending transactions, the upward trend and the so-called base effects mean that “credit growth is moving towards 50%.”

The second source said the step will not affect production or economic growth and that it aims to curtail the increasing demand for some imported goods.

The sources said the bank may make the adjustment soon.

The central bank declined to comment.

Governor Murat Uysal has said the central bank would use required reserves “in an effective and flexible way” in 2020 as a fine tuning tool.

Last month Uysal said the bank had been paying more attention to consumer loans which were “going faster” than other areas. “It is an area that we have to follow more cautiously. We can take a step when needed,” he said. (Writing by Ali Kucukgocmen; Editing by Jonathan Spicer)

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