Foreword

Murat Çetinkaya
Governor

For the Central Bank of the Republic of Turkey (CBRT), 2017 was a year in which comprehensive efforts were made to fulfill the bank’s statutorily-mandated duty of achieving price stability and maintaining financial stability. To achieve lasting price stability, an integrated strategy was formulated taking structural elements into account as well. In line with this strategy, which was publicly announced, the CBRT proactively deployed monetary policy tools in its efforts to combat inflation, and sought to mitigate risks by increasing stakeholder awareness of economic structural elements and by also involving them in the effort.

Mindful of the effects of global and domestic developments on the national economy and taking steps to safeguard stability, the CBRT markedly tightened its monetary policy stance in order to contain upside risks to price stability. The predictability of the Bank’s monetary policy framework was substantially increased. Supportive practices were introduced in order to head off unsound market price formations that were deemed to be inconsistent with economic fundamentals. The establishment of a “Foreign Exchange Deposits Against Turkish Lira Deposits” market and the facility allowing export rediscount credits to be repaid in Turkish liras in certain periods have been realized within this context.

To achieve price stability, the CBRT continued coordinated work on structural issues. The positive effects of the measures taken by the Food and Agricultural Product Markets Monitoring & Evaluation Committee (Food Committee), for which the CBRT began providing the secretariat, in effective collaboration with stakeholders began to manifest themselves in 2017. These measures, which focus on pricing behavior, market mechanisms, supply chain, and productivity, are expected to contribute to price stability in the medium term.

Through the guidance of the Financial Stability Committee, the CBRT carried out work to more effectively manage the real sector’s exchange rate risk, which is a matter of significant concern from the standpoint of price stability and financial stability. A Systemic Risk Data Monitoring Model was formulated to permit firms’ FX assets and liabilities to be monitored in a timely and continuous manner. The first-stage objective of this was an arrangement establishing linkages between firms’ foreign currency earnings and their debts. Work is currently in progress to make rule and regulatory changes that will improve the risk-management framework.

Proactive use was made of communication channels in order to increase the effectiveness and public awareness of monetary policy. Meetings continued to be held with firms to strengthen communication ties with real-sector representatives. Meetings focusing on technical issues were also regularly held with investors and analysts. Memorandums of understanding were signed to strengthen communication with global and regional stakeholders. Within the framework of steps taken to reinforce institutional knowledge and experience, various conferences, seminars, panel discussions, and workshops were conducted at both the national and the international level.

For the CBRT, 2017 was also a year in which a number of corporate transformation projects were carried out. In line with its basic goal of becoming an exemplary central bank that adheres to the best globally-recognized standards and is open to continuous development, steps were taken to increase competency and productivity with the aims of improving business processes, strengthening the technological infrastructure, and raising the standards of human resources practices.

In line with its statutorily-mandated duty of achieving and maintaining price stability, the CBRT continues to support the balanced and sustainable growth of the Turkish economy. In keeping with the consensus arrived at with the government in the process of laying out the country’s Medium-Term Program, annual inflation for the 2018-2020 period is targeted to converge at the 5 percent level towards the latter year. The CBRT will continue to make effective use of all available policy tools to gradually achieve that target. The most important duty incumbent upon us is to continue moving in the direction of our fundamental goals. I am fully confident that, with the additional support of structural measures to be taken in the period ahead, we will continue to advance gradually but surefootedly on the path of price stability.

Murat Çetinkaya
Governor