Foreword

For the Central Bank of the Republic of Turkey (CBRT), 2018 was a year in which comprehensive efforts were made to achieve price stability and enhance financial stability. An integrated strategy was formulated and monetary policy tools were employed proactively to achieve lasting price stability. Moreover, further efforts were made to raise awareness of structural elements.

In 2018, the CBRT took multi-dimensional policy actions to contain the impacts of fluctuations in global financial markets, increased protectionism in international trade and the geopolitical developments on the Turkish economy and to mitigate risks. In line with this strategy, the simplification process in the monetary policy was completed. To contain the deterioration in inflation expectations and the pricing behavior, a strong monetary tightening was implemented. Moreover, to ensure efficient functioning of markets, a set of financial stability-oriented measures were taken that enhance the Turkish lira and foreign exchange liquidity management. Accordingly, the upper limit for the FX facility under the ROM in the scope of required reserves was lowered; TL and FX reserve requirement ratios were reduced, which provided the markets with liquidity; banks’ conditions for collaterals were eased and the rediscount credits were enabled to be paid in Turkish lira. In addition, the CBRT launched Turkish lira settled forward foreign exchange transactions at Borsa İstanbul Futures and Options Market with institutional and individual investors; and the Turkish Lira Currency Swap Market was opened. All these endeavors aimed at deepening of the futures markets.

Under the scope of the holistic approach oriented towards price stability and financial stability, the CBRT contributed to the endeavors undertaken with national shareholders in 2018 with a view to enhancing policy coordination and ensuring the implementation of an effective policy mix. Accordingly, the CBRT participated in the restructured Financial Stability and Development Committee. On the price stability front, further contributions were offered to studies undertaken with the shareholders of the Food and Agricultural Product Markets Monitoring and Evaluation Committee (the Food Committee). The measures to be taken by the Food Committee regarding the pricing behavior, market mechanism, supply chain and effectiveness in production are expected to contribute to price stability in the medium term. Moreover, endeavors regarding the Systemic Risk Data Monitoring Systems designed to serve the exchange rate risk management of the corporate sector are likely to boost financial stability.

As an element to support monetary policy, communication channels were used intensively to raise public awareness by the CBRT. Accordingly, the CBRT continued activities to raise awareness of price stability and monetary policy targets by addressing all sections of the community through various platforms like the “CBRT Blog” and “Economics for All.” Through these communication channels, videos and infographics were broadcast regarding central banking, monetary policy and basic economic concepts; country-wide school visits were made and various conferences and seminars were held. Additionally, bilateral agreements were put into force to strengthen cooperation with international organizations. A joint and holistic effort was made especially in the combat with inflation through the technical meetings held with the representatives of the corporate sector, investors and analysts.

With a view to reinforcing the institutional know-how, ensuring quality improvement of the bank’s staff, monitoring global changes regarding central banking, adapting to new technologies and ensuring that they are used in monetary policy decisions, various conferences, seminars, panel discussions, and workshops were conducted at both the national and the international level at the CBRT in 2018 as well. These organizations enabled exchange of views with global stakeholders, and contributions were made to the studies undertaken at the CBRT.

Improving business processes, strengthening the institutional infrastructure and change were made integral parts of the corporate culture and corporate transformation, which was launched to provide the CBRT with a more dynamic structure and continued at full speed in 2018. Accordingly, a series of job developments and improvements were launched.

In addition to the statutorily‑mandated duty of achieving price stability, the CBRT supports the balanced and sustainable growth of the Turkish economy by safeguarding financial stability as well. Consistent with the consensus reached with the government during the formulation of the New Economic Program, annual inflation for the 2019-2021 period is expected to converge to the 5-percent target after falling to single digits at end-2020. The CBRT will continue to make effective use of all available policy tools to gradually achieve that target.

Murat Çetinkaya
Governor