The New Monetary Policy of the Central Bank: Two Targets-Three Intermediate Targets-Three Tools

Abstract

The new monetary policy of the Central Bank: two targets-three intermediate targets-three tools The Central Bank of Turkey has started to conduct a new monetary policy since mid 2010. In the new framework, in addition to the price stability aim, a second objective has been introduced: to achieve financial stability. Two intermediary targets have recently defined in the light of the financial stability objective: to slow down credit growth and to constrain short-term capital inflows. This article mainly discusses to what extent the short term interest rate and the associated liquidity management policies that are pursued to achieve price stability are compatible with the required reserve policy used to achieve financial stability.