The central bank, on the advice of the IMF, took several steps to tighten its monetary policy in the week ending 8 September. This action was aimed mainly against an unusual upward turn in late-summer inflation, to an annualised 86.9 per cent in consumer terms at the end of August.

The moves also aimed to bolster the exchange rate through curbing lira liquidity. Excess liquidity has been blamed for the recent pressure on the currency.

The central bank’s steps were:

the temporary suspension on 6 September of all its foreign exchange purchases until 18 September because of excess reserves. Excluding gold, these reached a record $15,361 million on 1 September. Effectively, the suspension temporarily halted lira injections by the central bank for its foreign exchange purchases, while the foreign currency left in the markets formed an additional buffer, say analysts

a forward cap on its dollar exchange rate (buying) of TL 48,340 and TL 48,480, respectively, for 14 and 18 September. This sought to prevent the lira depreciation from breaching limits agreed with the IMF

the decrease on 7 September by 5 percentage points to 20 per cent of mandatory transfers to the central bank of foreign exchange transactions by banks and other authorised institutions. This added to the foreign exchange buffer in the markets

a 12 September central bank decree has introduced a 6 per cent tax on foreign loans borrowed by banks until the end of 1995. The institution itself and the treasury, however, are exempted, as are investment, foreign capital inflows and export financing. This action aims to prevent the fuelling of lira liquidity by a growing inflow of short-term foreign funds seeking to take advantage of interest and exchange rate differentials, analysts say.