Turkey's Central Bank on Wednesday presented its monetary and exchange rate policy for 2022, which will see Turkey maintaining its floating exchange rate and keeping the medium-term inflation target at 5%.

"The primary objective of the Central Bank of the Republic of Turkey (CBRT) is to achieve and maintain price stability. The medium-term inflation target of 5% set jointly with the Government has been maintained. The monetary policy will be formulated to bring inflation to the target gradually," the regulator said.

The statement added that the bank would continue applying the inflation targeting regime, and its main policy instrument is expected to be the one-week repurchase agreement auction rate.

"The implementation of the floating exchange rate regime will continue, and exchange rates will be determined by supply and demand factors balancing under free-market conditions," the bank added. 

The central bank will also be increasing Turkey's foreign exchange reserves in 2022, depending on the market conditions.

The Turkish economy has been undergoing hardship throughout the past year due to the deterioration of the national currency. The Turkish Lira lost more than 50% of its value over 2021, which led the central bank to reduce the interest rate several times.

Erdogan: Turkey's goal is to enter the top 10 economies globally

Turkish President Recep Tayyip Erdogan had said Tuesday his government's new economic measures took the country out of a so-called vicious cycle, and Turkey’s goal is to enter the top 10 economies of the world.

"Our way is investments, employment, production, export, and growth. Our goal is to enter top 10 world economies," said Erdogan at an awards ceremony of the TUBITAK council for scientific and technological studies.

More than 5000 people protested had in mid-December in Istanbul against the lira's devaluation and the decrease in the purchasing power, calling for the government's resignation.

Inflation in Turkey

In January 2021, the Turkish Lira traded at 7.4 TRY/USD. In December, it traded at the low price of 18.4 TRY/USD.

The lira's drop is attributed to Turkish President Recep Tayyip Erdogan announcing new measures against currency fluctuations.

The presidential decision led to the opposition demanding early elections after accusing Erdogan of dragging the country into an economic crisis.

Erdogan denied the accusations, saying the elections would be held as planned, in July 2023, to be specific.