1 Keynote speech delivered by His Excellency Dr. Mohammad Y. Al-Hashel, Governor, Central Bank of Kuwait in the 12th  High Level Meeting for the Middle East & North Africa Region, jointly organized by the Basel Committee on Banking Supervision, the Financial Stability Institute and the Arab Monetary Fund, held on December 7, 2016 in Abu Dhabi, UAE. 1  To start with, technology is supporting the outreach of formal financial services to the millions of otherwise unbanked customers. According to the World Bank, the poorest 20% of the world population is more likely to have access to a mobile phone than to clean water and sanitation. Capitalizing on this opportunity, a number of countries have managed to swiftly expand access to finance in recent years. Globally, number of adults who were previously out of formal financial system has dropped by 20% during 201114 alone. As these encouraging trends suggest, digitalization offers an unprecedented opportunity to improve access to finance to the millions of people who have remained financially excluded so far. Likewise, programing breakthroughs like blockchain are potentially transforming the way we verify transactions and enforce contracts. By allowing parties to transact without central intermediaries, blockchain can strip off costs, reduce inefficiencies, and enhance customer services. Host of other innovations are reshaping the way we transfer money or obtain credit. For instance, mobile wallets are enabling payments by smart phones, peer-to-peer lending is providing new sources of financing, and roboadvisors are offering financial advice.

The pass-through effect has been gradually becoming weaker, as a consequence of the transition to the floating exchange rate regime, increasing competitiveness, inflation targets increasingly assuming the role of being an anchor owing to reliable economic policies, as well as changes in the pricing behavior of producers and consumers. Especially in the recent period, the effects of the changes in the exchange rate on inflation were lower than expected, and at the same time were weaker and more lagged compared to previous periods. As a matter of fact, worldwide examples also show that in economies that have achieved price stability, the pass-through effect on prices of exchange rate movements becomes weaker owing to the  BIS Review 36/2005  7  prevalence of pricing in terms of the domestic currency, thus perceiving any depreciation of the national currency as temporary, and companies resort to price adjustments much less frequently. In fact, it is inevitable that exchange rate developments will influence prices in Turkey due to the fact that the goods basket of the CPI mainly consists of imported goods and imported intermediate goods make up a significant portion of input costs. Another contributory factor is that Turkey is a small sizeopen economy obtaining goods at global prices. Yet, studies conducted under the umbrella of the CBRT point to an evident breach regarding the reflection of exchange rate developments on prices following the 2001 Crisis. The pass-through effect of the historically high exchange rates on prices seems to have weakened especially in case of non-tradable goods.