A Glance at 2023

MONETARY POLICY AND DISINFLATION

The CBRT initiated a monetary tightening process in the second half of 2023 to establish disinflation as soon as possible, anchor inflation expectations, and contain the deterioration in pricing behavior. In the same period, the CBRT introduced comprehensive simplification measures within the framework of micro- and macroprudential policies in order to enhance the functionality of the market mechanism and strengthen macro financial stability along with monetary tightening.

The impact of monetary tightening on inflation started to kick in as of the last quarter of 2023. In the last quarter, inflation edged up slightly, while the underlying trend of inflation receded. Pricing behavior showed relatively stronger signs of improvement in core goods. While services inflation remained sticky, the trend in items that are more sensitive to changes in demand and cost conditions slowed down in the last quarter. On the other hand, the monthly increase in housing prices was below inflation, replacing the ongoing excessive increases. Thus, year-end inflation for 2023 stood at 64.8%, in line with the projections released in the last Inflation Report for 2023. The cumulative effects of monetary tightening on annual inflation are expected to be more pronounced in 2024. Although temporary increases in inflation are expected in the first half of 2024, the disinflation process is projected to take hold as of the second half of the year. The tight monetary policy stance is envisaged to support the rebalancing in domestic demand and the gradual improvement in the current account balance, as well as contributing to a stronger demand for Turkish lira assets.

While the tightening effects of monetary policy on financial conditions started to be observed as of the last quarter of 2023, loan growth and composition normalized. Against this background, the growth rate of retail loans, which peaked in May and posed a risk to inflation by driving domestic demand, converged to historical averages towards the end of the year. Commercial loan growth stabilized in the last quarter of the year. On the other hand, deposit rates started to go up amid policy rate hikes, regulations to increase the share of Turkish lira deposits, and quantitative tightening steps. In parallel, the share of Turkish lira deposits increased while the share of FX-protected deposits decreased. Meanwhile, portfolio inflows to Turkish lira assets recorded an increase due to the decline in the risk premium and implied exchange rate volatility.

In 2023, the CBRT maintained its reserve-building strategy as long as market conditions allowed. Monetary tightening and the simplification measures in the macroprudential framework also supported the upward trend in reserves.

PLAIN, EFFECTIVE AND BILATERAL COMMUNICATION

In 2023, the CBRT maintained a plain, transparent and bilateral communication policy to foster confidence and explain to all stakeholders the decisive steps it took in pursuit of its primary objective of achieving price stability.

  • In 2023, the decisions of the Monetary Policy Committee, Inflation Reports, Financial Stability Reports, Monthly Price Developments, the Monetary Policy Text for 2024, actions related to macroprudential measures, and the statistics and analyses released by the CBRT were publicly announced through press releases and other communication channels, as well as through the CBRT’s actively used social media accounts.
  • As part of bilateral communication, four Inflation Report Briefings were held in 2023, during which questions of press members, economists, and analysts were addressed.
  • For the purpose of establishing a high level of coordination with all stakeholders to establish disinflation as soon as possible, Governor Hafize Gaye Erkan attended various national and international meetings and visited professional associations and chambers to explain the macroeconomic outlook and the CBRT’s policies and strategies.
  • In keeping with the principle of accountability, Governor Erkan delivered a presentation at the Grand National Assembly of Türkiye’s (GNAT) Plan and Budget Committee and answered questions from the Committee members.
  • New analyses were posted on the CBRT Blog, a corporate blog dedicated to enabling the CBRT staff to share their analyses with the public, draw attention to economic developments, and provide timely contributions to the conjunctural framework. This platform was further enriched with studies of the impact of the CBRT’s policies.
  • As part of its social media strategy, the CBRT effectively used its social media accounts, sharing posts using plain and clear language and rich visual content.
  • Fresh content has been uploaded on the “Economics for All” microsite in order to raise awareness of the importance of price stability and the disinflation path, and numerous efforts are being made to further improve this platform.

MORE INTENSIVE AND EFFICIENT USE OF TECHNOLOGY AND FINANCIAL INFRASTRUCTURE

  • Following the February 6 earthquake disaster, which struck a wide geographical area, particularly Kahramanmaraş, CBRT service units in nearby provinces mobilized their operational capacities to meet the needs of the region and ensured uninterrupted cash payments in earthquake-affected areas.
  • Notifications and inquiries regarding cash collection transactions from banks and inventory data were included in the web-service infrastructure, thereby reinforcing the IT infrastructure for cash transactions.
  • With the technological investments, our daily banknote processing capacity increased by 23% to 44,400 packages.
  • Five new Decentralized Cash Management (MONY) depots started operating, ensuring that the strategic and backup banknote depots were kept at sufficient levels and banknotes were circulated in a composition of high quality and clean banknote denominations.
  • In the Information Technologies (IT) field, the CBRT continued its efforts to create the technological solutions and systems needed in line with its vision as well as to ensure the security and continuity of these systems.
  • The CBRT continued to transform its technology and application architecture to respond to its needs more quickly, to keep continuity high by increasing technical platform alternatives, and to enable end-to-end monitoring of the services provided.
  • To increase business continuity, the CBRT continued to work on improving the infrastructure needed for the operability of its IT systems and applications in different data centers in addition to the existing ones.
  • Work was carried out to enhance cybersecurity resilience and scale up preventive controls.
  • Work was carried out to build the IT infrastructure of the CBRT premises in the Istanbul Financial Center.
  • The CBRT renewed the communication infrastructures of its Internet and payment systems applications.
  • In 2023, ten Payment and Electronic Money Institutions were added to the Instant and Continuous Transfer of Funds (FAST) System, a new generation 24/7/365 instant payment system operated by the CBRT, to increase competition and innovation in payments and to provide new and value-added services, raising the number of members to 36. Given the users’ great interest in the FAST System and the dynamic requirements of the payments ecosystem, the FAST transaction limit for money transfers was raised to TRY 50,000 as of 21 December 2023. The FAST transaction limit is planned to be gradually increased. On the other hand, overlay service projects continued in 2023, and work was carried out to expand the use of KOLAS (the Easy Addressing System), QR Codes, and SIPER (Security Overlay Service). The Request-to-Pay Overlay Service was developed and put into pilot use.
  • Pilot tests were conducted as part of the Central Bank Digital Turkish Lira Research and Development Project, with the first phase ending in the first half of 2023. The CBRT released the Digital Turkish Lira Phase I Evaluation Report, which presents the findings of the CBRT’s R&D studies and the first phase undertaken with Digital Turkish Lira Collaboration Platform stakeholders, as well as the approaches adopted in the project.
  • Research, development and testing continued on interoperability across different networks and technologies, applications that protect data privacy, payment systems on distributed ledger platforms, high-performance architectures, programmable payments, and digital currency simulation. Various proof-of-concept studies were carried out in the areas of programmable payments, e-commerce payments, international payments, offline payments, and hybrid systems for the use of the digital Turkish lira in payments.

COORDINATION WITH NATIONAL AND INTERNATIONAL STAKEHOLDERS

In 2023, the CBRT continued to carry out activities under its mandate and authority to strengthen cooperation with national and international stakeholders and deepen existing relations. It actively engaged in meetings and events organized both in person and online, thus interacting with both bilateral and multilateral stakeholders.

  • The CBRT held 76 investor meetings involving domestic and foreign institutional investors, economists, analysts, and portfolio managers, and communicated with 304 institutions to ensure timely, accurate, and effective communication of monetary policies. In coordination with the Ministry of Treasury and Finance, six meetings were held with credit rating agencies throughout the year.
  • The CBRT hosted the fifth meeting of the “OIC-COMCEC Central Banks Forum” under the Organization of Islamic Cooperation (OIC), of which it acts as the secretariat, on 24‑25 September 2023 in Istanbul. The project within the scope of “COMCEC Project Funding” was carried out by the Statistical, Economic and Social Research and Training Center for Islamic Countries (SESRIC) in partnership with the CBRT, Bank Indonesia, Bank Negara Malaysia, and the Saudi Central Bank.
  • The International Monetary Fund (IMF) delegation visited Türkiye in line with its mandate to monitor the economic and financial policies of member states and safeguard the international monetary system. In the scope of this visit, the CBRT delegation participated in Article IV meetings on 25-29 September 2023.
  • The CBRT continued to take part in work related to international meetings organized by the G20, the IMF, and the Bank for International Settlements (BIS). The CBRT coordinated with domestic and international stakeholders, and duly participated in such meetings.
  • The CBRT took part in the work of the Network for Greening the Financial System (NGFS), which is a collaboration network for the management of the financial sector’s environment and climate-related risks. The CBRT took an active role in writing NGFS reports on climate change and central banking. The Bank also contributed to the G20 Sustainable Finance Working Group.
  • In order to contribute to the enhancement of institutional competence and improve technical capacity, 57 events were organized between the CBRT and 31 central banks around the world concerning matters of focus on the global agenda in central banking. Six of these events took place as physical visits to maximize the benefits of the activities. Along with technical cooperation, the CBRT also met with senior representatives of partner central banks and foreign missions in Türkiye, helping to deepen relations between the CBRT and partner countries at every level.
  • As part of Türkiye’s accession to the European Union (EU), the CBRT made the necessary contribution on the issues that fall under its remit. The Bank also actively participated in the Economic and Financial Dialogue meetings, and meetings of Economic Forecasts for Candidate Countries, as well as the meeting of Subcommittee No. 4 on Economic and Monetary Issues, Movement of Capital, and Statistics.

CULTURAL, ARTISTIC AND SOCIAL SENSITIVITY

In addition to fulfilling its main duties and responsibilities, the CBRT continued to engage in corporate social responsibility activities and support academic studies with donations and aid.

  • The CBRT continued to award scholarships to the graduates of Derince Anatolian High School. A graduation ceremony was held where successful students received awards.
  • The CBRT donated IT equipment and books to public institutions as part of corporate social responsibility activities in 2023.
  • The Bank contributed to the aid campaign for the February 6 earthquakes in Türkiye and helped in search and rescue operations.

INCREASING THE EFFECTIVENESS OF THE PAYMENTS AREA

The CBRT continued to take steps to foster financial infrastructure in order to establish payment and securities transfer and settlement systems, to ensure uninterrupted operation and supervision of the existing and future systems and make the related necessary arrangements, and to determine the methods and instruments to be used for payments, including the electronic environment.

  • The Guidelines for External Service Providers Offering Community Cloud Services to Payment and Electronic Money Institutions were issued on the CBRT’s website and entered into force.
  • Amendments were made to the “Regulation on Payment Services and Electronic Money Issuance and Payment Service Providers” (Payment Services Regulation) and the “Communique on the Management and Supervision of the IT Systems of Payment and Electronic Money Institutions and the Data Sharing Services of Payment Service Providers in Payment Services Area” published on the Official Gazette No.31676 dated 1 December 2021. These amendments were published on the Official Gazette No.32332 dated 7 October 2023.
  • As of 1 December 2023, the Data Sharing Services in the Field of Payments (DSSP) API Standard switched from version 1.0.2 to version 1.1.0, and the process of spreading the DSSP Gateway (GEÇİT) Infrastructure continued. Accordingly, Incident Notification Services and Decoupled Strong Customer Authentication were added to the standard in addition to improvements in existing functions. There are currently 16 Account Servicing Payment Service Providers (ASPSPs) and 19 Authorized Payment Service Providers (PSPs).
  • In coordination with relevant stakeholders, especially the Interbank Card Center (BKM), efforts were made to promote payments using the TR QR code while also monitoring the process of setting up the technological infrastructure for the code.
  • The transition process for participation in the Merchant Registration System (MRS) was concluded, and Data Sharing Services flows were initiated following the work carried out with the participation of payment service providers under the coordination of BKM.
Up