In this context, the CBRT will continue to monitor global economic developments closely and will take the required measures promptly to maintain stability in domestic financial markets. While formulating the monetary policy, we will continue to monitor fiscal policy developments closely as well. In this respect, our forecasts presented in the baseline scenario take the Medium Term Program as given and thus assume that fiscal discipline will be maintained. A revision in the monetary policy stance may be considered, should the fiscal stance deviate significantly from this framework and consequently have an adverse effect on the mediumterm inflation outlook. In the period ahead, monetary policy will continue to focus on price stability while preserving financial stability as a supporting objective. To this end, the impact of the macroprudential measures taken by the CBRT and other institutions on the inflation outlook will be carefully assessed. Strengthening the commitment to fiscal discipline and the structural reform agenda in the medium term would support the relative improvement of Turkey’s sovereign risk and thus, facilitate macroeconomic and price stability. Sustaining the fiscal discipline will  10  BIS central bankers’ speeches  also provide more flexibility for monetary policy and support social prosperity by keeping long-term interest rates permanently at low levels. In this respect, I would like to conclude my remarks by underlining that timely implementation of the structural reforms envisaged by the new Medium Term Program remains to be of the utmost importance. Thank you for your participation. BIS central bankers’ speeches  11

The measures included in this plan would have a positive impact of 0.2 pp on the average GDP growth rate. 3  situation, use of the Next Generation EU (NGEU) funds and financing conditions that, while somewhat tighter than in previous quarters, remain favourable. Turning to the inflation forecasts, in step with the paths of the corresponding futures markets, the upward pressures of the energy component are expected to peak in the second quarter of 2022 and then decelerate. The inflation projections rest on two assumptions: (i) that, in line with the information from the EBAE, the pass-through of higher intermediate costs to final prices will only be relatively moderate (albeit more forceful than envisaged in the December projection exercise); and (ii) that the second-round effects will be limited, i.e. scant feedback effects between inflationary pressures on prices and wages. Inflationary pressures will be partly alleviated by the measures contained in the National Plan to respond to the economic and social consequences of the war in Ukraine.4 Furthermore, these projections do not yet include the possible changes in prices on the electricity market that are currently being negotiated in the European Union. Against this backdrop, the projections see inflation standing at 7.5% in 2022. It will then fall in 2023 to around 2%, thanks, above all, to the moderation of the energy component. Underlying inflation will not start to decline until end-2022, once the upward pressures on firms’ costs associated with energy prices and bottlenecks have corrected.