Observations on recent monetary policy measures

Observations on recent monetary policy measures Last December the Central Bank embarked on a new monetary policy experiment, which signaled a paradigm shift of sorts in monetary policy practice in Turkey. On the one hand, what the Bank did was very courageous and timely: it saw the unsustainability of the current account deficit and made an attempt to "remove the punch bowl, as the party was still going". But the preferred policy mix created a number of question marks in analysts' minds. We also think a different and a somewhat more comprehensive and simpler route could have been taken in the management of capital inflows, or in the conduct of monetary policy in particular In this article, we tried to explain why we thought so, from three perspectives: the context from which the new policy mix has originated; the internal consistency of and the risks associated with the Bank's approach, and whether it had been successful (as of late March/early April) in achieving the targeted objectives.