The  2  See Adrian, Fleming, Stackman, Vogt (2015) Has U.S. Treasury Market Liquidity Deteriorated?, Liberty Street Economics Blog, August 17, for further analysis of Treasury market liquidity. 3  See Adrian, Fleming, Vogt, Wojtowicz (2016) Corporate Bond Market Liquidity Redux: More Price-Based Evidence, Liberty Street Economics Blog, February 9, for further analysis of corporate bond market liquidity. 4  See U.S. Department of Treasury, Notice Seeking Public Comment on the Evolution of the Treasury Market Structure, January 2016. 2  BIS central bankers’ speeches  stagnation in dealer assets might indicate that inventory risk has shifted from dealers to asset managers and other buy-side participants, reflecting a shift in market-making from a “principal” to an “agency” model. While increases in regulatory requirements have undoubtedly played a role, I think that other non-regulatory factors are also important. Liquidity provision is affected by changes in market structure, how trades are executed, and by competition from those operating outside of the regulatory boundaries that have been established for systemically-important financial institutions. Similarly, the demand for liquidity is also evolving with the growth of large asset managers, mutual funds, exchange traded funds (ETFs) and principal trading firms (PTFs) – which are sometimes referred to as high-frequency trading firms. In the U.S. Treasury market, for example, high-frequency trading firms have seized a large proportion of the interdealer market in recent years (Exhibit 8). In the credit market, a rapidly rising share of corporate bonds outstanding is now held by mutual funds (Exhibit 9).

We used our main policy tool, the one-week repo auction rate, and macroprudential policy tools in line with the Liraization Strategy. Accordingly, we kept the policy rate (the one-week repo auction rate) unchanged at 14% in the January-July 2022 period. On the other hand, we acted in a proactive manner in the face of intensifying risks of a global recession driven by geopolitical developments and global financial conditions. To limit the effects of these risks on domestic supply, investment and current account surplus capacity and to sustain the structural gains in industrial production and employment, we initiated a rate-cut cycle in August. As of November, we had delivered a rate cut of 500 basis points in total, bringing the policy rate down to 9%. With these decisions, we enabled investments that will strengthen Türkiye's position to continue at suitable financing costs at a time when the global economy was facing supply chain and financing problems. In 2022, we also conducted an effective reserve management to reinforce our international reserves. We created a diversity of sources through deposit accounts converted from foreign exchange, YUVAM accounts that we devised for non-resident citizens, FATSI accounts aimed at bringing physical gold into the financial system, and regulations regarding the selling of a portion of export proceeds to the Central Bank. As a result of all these actions, our international reserves rose by 17% from USD 111 billion at end-2021 to USD 128.8 billion at end-2022. Meanwhile, international reserves of central banks decreased by 6% on a global scale in 2022.