The “Price Developments” report will be published on the working day following the announcement of inflation data. Beside these communication tools, speeches and presentations made by Central Bank autorities at the meetings in Turkey or abroad constitute an important pillar of the communication policy. Working papers, booklets and technical notes published along with the conferences and workshops organized by the Bank will be used as effective tools for communication policy. 1  The publication calendar for the Inflation Report and the Financial Stability Report along with the Monetary Policy Committee Meeting dates are presented in the Appendix. BIS Review 4/2008  5  Exchange rate policy and liquidity management Exchange rate policy and foreign exhange buying auctions Along with inflation targeting, the Central Bank will continue to implement floating exchange rate regime in 2008. As stated in the annual monetary and exchange rate policy announcements that have been published since 2002, the foreign exchange rate is neither a target, nor a policy tool in the floating exchange rate regime. Exchange rates are determined according to the supply and demand conditions in the market. The main factors affecting foreign exchange supply and demand are the monetary and fiscal policies implemented, international developments, economic fundamentals, and expectations. Even if floating exchange rate regime has been adopted, keeping a strong foreign exchange reserves position is very important in emerging economies like Turkey to eliminate the unfavorable effects of potential internal and external shocks and to boost confidence in the country’s economy.

The answer sought while forming forecasts and monetary policy outlook in the Inflation Report is: “What is the monetary policy stance that will keep inflation close to the target in the medium-term?”  4  BIS Review 4/2008  The monetary policy stance in this sense does not only consist of the current level of shortterm interest rates. Monetary policy stance indicates the prospective path that short-term interest rates will follow in a period that extends from today to medium term. Sharing with the public the interest rate assumptions that form the basis of forecasts, though qualitatively, is a remarkable step towards enhancing the transparency and predictability principles that are essential for inflation targeting. Communicating with the public about the possible Central Bank policies influences mediumterm market interest rates via expectations and strengthens the transmission mechanism. However, it should be reminded once again that the monetary policy stance path pronounced in the Inflation Report is produced according to currently available information and that each new data release related to the medium-term inflation outlook would necessitate the revision of the future monetary policy stance. Under the inflation-targeting regime, revisions in the monetary policy stance are not an exception, but a rule. Thus, the monetary policy stance established according to currently available data should not be interpreted as a commitment. Any unforeseen change in the variables that affect inflation outlook calls for the re-definition of the monetary policy stance. What is important here is to share openly with the public the reasons of the monetary policy stance update.