At this stage, it is impossible not to agree with President Trichet, in this statement: “The undesirable social and economic consequences of inflation, namely inefficient allocation of resources, high levels of interest rates, the regressive inflation tax, arbitrary redistribution of income and wealth to the detriment of the most vulnerable, and, last but not least, economic instability, lower growth and lower job creation, are the benchmarks against which one has to assess the social benefits of price stability. This is why a credible commitment to maintaining price stability is so important for the living standards of European citizens.” 1 Together with its independence, the Central Bank of Turkey was set to be accountable in various ways. In this sense, according to Article 42 of the Law on the Central Bank of Turkey, we are accountable to communicate with the Government and with the public if inflation deviates excessively from the target, or even a possibility of deviation becomes evident. Moreover, in line with the transparency principle, we have started to give more importance to sharing our views about the general economic outlook, current inflation and inflation outlook and informing about monetary and exchange rate policies through press releases, announcements, reports and every other means such as press meetings, interviews, speeches and presentations. The Law also set up the Monetary Policy Committee (MPC). Having got the instrument independence, the Central Bank moved from implementing monetary policies aiming at implicit inflation targets together with certain monetary aggregates as intermediary targets to an explicit inflation targeting regime.

In order to safeguard this informal, implicit independence, the CBT was established as, and still is, a joint stock company, in which the state and  BIS Review 57/2007  1  other local entities hold shares. This structure was by no means a coincidence, but of deliberate design aiming at minimizing government intervention. However, in today’s world, the relationship between ownership structure and central bank independence has become less significant. Nowadays, the most independent central banks are wholly state-owned and the central bank independence involves much more than just ownership. The early years of the establishment were the years in which autonomous functioning of the CBT was at the forefront. The central bank operations were respected and at times demand for short-term credit by the governments was then resisted. The outcome was low inflation. The basic aim of the Bank was to support the economic development of the country. To this end, the Bank’s main operational tools were to set rediscount rates, regulate money markets, execute the Treasury operations and take, jointly with the Government, all measures to protect the value of the Turkish currency. During and after the Second World War, central banking underwent drastic changes in the world in line with the gradual global economic and political transformation. The scope of the central bank’s mandate to manage and control the circulation of currency was extended. Its responsibility now ranged from issuing banknotes, functioning as a lender of last resort, achieving and maintaining low inflation to being the guardian of financial stability.