Secondly, it requires unwavering determination and capacity to act: let me reiterate firmly here today, not just our forecast but also our commitment, alongside Christine Lagarde, to bring inflation back towards 2% in the euro area and France by end-2024/2025. Credibility ultimately means renewing our communication: since last year, like all other major central banks, we have stopped giving the markets “forward guidance” in the form of a commitment to a path of key rates that is unconditional and/or extended over time, as this no longer appears suited to today’s highly uncertain environment. However, market expectations of the future path of key interest rates are an essential determinant of medium and long-term interest rates, those that matter the most for investment and spending decisions. We therefore need to aim, with humility, for a “new predictability” in our communication.6 To do this we need to overcome at least one challenge, which relates to the overly strict interpretation of what “deciding meeting-by-meeting” means. As witnessed with our meetings at the end of last October and in December, this would lead to surprises and excessive volatility. Monetary policy deserves better than a “live” prediction contest, or an overinterpretation of statements by different individuals. On 2 February, on the contrary, we made it clear that we intended to raise our key rates by another 50 basis points on 16 March, and that we would then evaluate the subsequent path of our monetary policy. Refusing to give long-term and unconditional “guidance” does not preclude providing some short-term visibility, today or tomorrow.

However, I should also underline the progress in institutional and legal framework, such as the introduction of the Public Fiscal Management and Control Law, the Public Procurement Law and the multi-year budgeting framework. Three year inflation targets that are compatible with the three-year budgeting practice are also one of the good examples of coordination between fiscal and monetary policies. Another pillar of better economic governance is financial stability. A stable and healthy financial system is the key to sustainable growth through allocating savings to the real sector  BIS Review 38/2008  3  in a country. Law defines financial stability as the auxiliary objective of the Central Bank of Turkey. Establishment of the Banking Regulation and Supervision Agency, successful implementation of The Banking Sector Restructuring Program and the New Banking Law that brought the legal framework with best international practices were the milestones of legal and institutional reform in the financial sector. No need to say that the improved macroeconomic framework through successful monetary and fiscal policy implementations also contributed much to financial stability. Last but not least, I should say that there is also an effective cooperation among the Central Bank of Turkey, the Banking Regulation and Supervision Agency, the Undersecretariat of Treasury, the Capital Markets Board and other public authorities and also with private sector representatives. The fourth and the final set of actions that has been undertaken towards better economic governance is structural reforms.