  Finally, aggressive near-term government spending cuts or tax increases could slow economic growth at least in the short- to medium-term – although a credible plan for medium-term fiscal consolidation is sorely required and would have many economic benefits. That said, I want to emphasize that these are risks rather than likely outcomes. In regard to inflation, on a year-over-year basis, the headline measures have increased to levels near those consistent with our objectives – which most members of the FOMC consider to be 2 percent or a bit less on the personal consumption expenditures measure. Moreover, the rise in commodity prices over the past year probably will push up headline inflation even further in coming months. It is noteworthy, however, that even with the sharp rise in oil and food prices, there has been little pass-through into broader measures of prices. In fact, most measures of underlying inflation trends – such as core inflation (which excludes volatile food and energy prices) – remain below levels consistent with our mandate. Going forward, futures markets do not signal that investors expect rapid ongoing increases in commodity prices from current levels. Provided these prices stabilize (or indeed retreat), I would expect headline inflation to move back to a mandate-consistent rate. While this process plays out, however, it is critical that we ensure that inflation expectations do not become unmoored. It is much harder to keep inflation in check if people begin to raise their expectations of inflation. At this point, measures of inflation expectations overall remain stable.

Durmuş Yilmaz: Press conference for the presentation of the Inflation Report Press conference by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, for the presentation of the Inflation Report, Ankara, 27 July 2010. *  *  *  Distinguished Guests and Members of the Press, Welcome to the press conference held to convey the main messages of the July 2010 Inflation Report. The report typically summarizes the economic framework addressed in monetary policy decisions, elaborates global and domestic macroeconomic developments and presents the medium-term inflation forecasts, which have been revised in view of previous quarter developments, along with the monetary policy stance. Before moving on to the Central Bank’s assessments on the inflation outlook and economic activity, which I will share with you in detail shortly, I would like to summarize the current global conditions. The recovery in global economic activity continued during the second quarter of 2010. However, with the deepening financial distress, the euro area experienced weaker growth than other advanced economies, pushing down the growth rate for advanced economies, whereas, emerging economies continued to grow faster than advanced ones (Figure 1). Furthermore, it is noteworthy that that the modest recovery in growth in advanced economies has not yet been reflected on labor markets (Figure 2). This situation continues to have a detrimental effect on sustainable recovery in these countries. Despite the recovery in global economic activity, recent developments have confirmed that the global economy remains fragile.