The impact of soaring food and energy prices on catering and transport services became more significant in the first quarter of 2010 (Figure 12). Consequently, annual services inflation, which has been declining since the third quarter of 2008, increased by 1.9 percentage points in the first quarter of 2010. Seasonally adjusted data also indicate that price increases in the services group accelerated compared to the previous quarter (Figure 13). The low base of the previous year caused by the tax cuts in durable goods and the inventory destocking process have been major factors accounting for the increase in core inflation indicators (Figure 14). Reverberations of the rise in cost factors and the limited rebound in demand are also seen in the seasonally adjusted data (Figure 15). Parallel to these developments, medium-term inflation expectations, which started to increase in the last quarter of 2009, maintained this trend in the first quarter of 2010 (Figure 16). While expectations displayed an increase in all maturities, the difference between expectations and targets became wider (Figure 17). However, the increase in medium-term expectations remained relatively limited. 2. Monetary policy response  After commenting briefly on inflation developments, I would now like to cover the policies pursued by the Central Bank during the last quarter. Anticipating that inflation would decrease sharply following the last quarter of 2008, the Central Bank of Turkey (CBT) focused on alleviating the potentially harsh impact of the global financial crisis on the domestic economy.

The Government has enhanced its efforts in this area by raising the capital of the Fund by Rls 9.0 billion to Rls 92 billion as from 2006. However, the accelerated population growth and the rising demand for housing have urged the creation of other real estate financing mechanisms in addition to the government’s financing mechanism. More finance and contribution by the private sector and reducing reliance on the government will give the private sector an opportunity to play a key role in this area which offers lucrative investment opportunities. Nonetheless, it is fair to say that the private sector in general and the banking sector in particular seek to obtain more guarantees to enter as financers in this vital sector. This demands working effectively by all relevant entities to develop mechanisms for meeting the rising demand in this sector. Dear Brothers, Over the preceding years, the Kingdom of Saudi Arabia has undertaken many economic reform measures, updated and streamlined its laws and regulations, restructured the national economy, approved a number of mega development projects, and joined the World Trade Organization (WTO). It has also made many important decisions aimed at attracting foreign investments and continued opening of the markets which will be reflected on the competitiveness of the national economy. All these positive developments are an incentive for investment in the Kingdom in general and in the housing sector in particular. Dear Brothers, This conference is held at a time when the Kingdom has achieved outstanding development results in all sectors of the economy.