8  BIS Review 100/2008  Figure 10: Output Gap 8 6 4 2 0 -2 -4 -6 -8 08Q1  07Q3  07Q1  06Q3  06Q1  05Q3  05Q1  04Q3  04Q1  03Q3  03Q1  02Q3  02Q1  01Q3  01Q1  00Q3  00Q1  -10  Source: CBT. Dear Guests, After the significant weakening of the Turkish lira in the first four months of 2008 (Figure 11), exchange rates have reversed direction in the past two months, easing to some extent potential pressures on tradable inflation resulting from the exchange rate pass-through. In the April Inflation Report and the Open Letter, the first round impact of the recent depreciation was estimated to be close to 2-percentage points for the end-2008 headline inflation. The recent rebound in currency has led to a downward revision in the estimated pass-through. We now anticipate a cumulative exchange pass-through of around 1.2 percent points for 2008, most of which has already been materialized between March-May period. Figure 11: Risk Premium and Nominal Exchange Rates 450  2 YTL/Currency Basket (0.5 Euro+0.5 US Dollar)  1,9  400  EMBI+Turkey (right axis)  350  1,8  300  1,7  250  1,6  200  1,5  150  07.08  05.08  03.08  01.08  11.07  09.07  07.07  0 05.07  1,2 03.07  50 01.07  100  1,3 11.06  1,4  Source: CBT.
Many of the issues we face are not unique to any one of us, but rather are shared across the region and the globe. Recent events, from the COVID-19 pandemic to the war in Ukraine, have only underscored the importance of active dialogue and transparency among central banks. Beyond the global economic impact of these events, it’s important to emphasize that the pandemic is first and foremost a public health crisis, and that the Russian invasion is inflicting tremendous hardship and suffering on the Ukrainian people. In terms of economic impacts, all of us in the Americas were affected by lockdowns and shutdowns at the start of the pandemic. All of us have faced supply-chain bottlenecks and imbalances, as people around the world shifted their spending habits—buying more goods and spending less on services. And many of us are now confronting a sharp rise in inflation, especially for food and energy, which is hardest on our most vulnerable populations. Of course, each country is facing its own set of circumstances, and each has its own domestic mandates. But it’s important to remember that the policies we implement can affect our neighbors, just as developments that take place outside our borders can impact our ability to achieve our domestic goals. The actions we take can also affect the flow of capital across countries. As central bankers, it is vitally important that we clearly communicate our policy strategies and reasoning for our actions as we carry out our mandates.