that we have drawn for the inflation targeting regime. therefore, i would like to take this opportunity to highlight some important elements of the formal inflation targeting regime once more in this meeting today. under this regime, the central bank adopts a medium - term perspective. accordingly, inflation targets are announced for a period of three years. the targets pertain to consumer inflation and these “ point targets ” are set jointly with the government. however, with the aim of setting a rule for the bank ’ s accountability principle in case inflation deviates from the target or in case a possibility that inflation might deviate from the targets emerges, an uncertainty band has been set as 2 percentage points in both directions. in case inflation figures go outside the band or there is a possibility of inflation going outside the band, the mechanism pertaining to the accountability principle of the central bank would be activated and our bank would explain the reasons of deviation from the target and provide information on the time needed for converging to the target again in an open letter to the government. such an open letter was written and sent to the government on july 14, 2006 and was also publicized. a lot of ground has been covered in the fight against inflation since 2002. however, price stability is yet to be established. it should be borne in mind that this is a long and tough journey. the developments we have observed in the last few months verify this view and make our efforts even more important. within this framework, in this part of my speech, i would like to talk about the developments in inflation and the monetary policy responses in the face of these developments since the beginning of 2006 and touch upon the future inflation outlook. i am sure you have been following very closely the upward trend in inflation observed since the turn of the year. annual inflation became 10. 12 percent in june 2006, exceeding the upper limit of the uncertainty band of the inflation path consistent with the end - year inflation target and this upward trend continued in july with 11. 69 percent. the factors that played a primary role in the upward move in inflation in the first seven months of the year were seasonal factors and external developments. prices of unprocessed food products started to increase due to adverse weather conditions by the last few months of 2005 and inflation in this group reached 21. 8 percent by july 2006. another factor that had an unfavorable impact on inflation was the rise in crude oil and energy prices. parallel to the rise in crude oil prices that started in international markets

erdem basci : the importance of commodity price movements opening remarks by mr erdem basci, governor of the central bank of the republic of turkey, at the conference on “ policy responses to commodity price movements ”, istanbul, 6 april 2012. * * * distinguished guests, welcome to the conference on the “ policy responses to commodity price movements ” jointly organized by the international monetary fund, the imf economic review and the central bank of the republic of turkey. as i will deliver another speech in the panel session on the second day of the conference, i will attempt to keep this inaugural speech as brief as possible. as you will recall, we hosted a conference on commodity price volatility in istanbul last september within the context of g - 20 program. these two conferences on similar topics in such a short time are clear indicators of how important the commodity price movements are for the global economy. why are commodity prices so important? when we think of what is covered by “ commodities ” more closely, we also come up with how we should approach this issue. usually, the term “ commodity prices ” represent energy prices ( mainly the crude oil ), food prices and the prices of some main industrial inputs. energy prices are very closely monitored by economic units and policy makers, for it denotes the cost of one of the most significant inputs for the entire economy. energy is one of the primary cost factors for firms. it is also a considerable item for households ’ heating and transportation expenditures. on the other hand, due to its high share in the expenditures of especially low - income households and corresponding purchasing power effects, food prices are given a great importance by policy makers. meanwhile, the metals, such as iron ore, copper and aluminum, are among the most important raw materials for the industry and construction sector. the reason why commodity prices have been frequently attracting attention is the current fluctuations in commodity prices of a magnitude that has not been seen since 2007. price of brent crude oil, which was usd 50 per barrel in early 2007, climbed to usd 145 within one and a half year. then, parallel to the deepening global crisis in late 2008, crude oil prices went back to usd 35 ; and now it is hovering around usd 125. and the uncertainties about oil prices, resulting from demand and supply - side developments, and their potential effects keep the policymakers interest in commodity prices alive in the current economic outlook. as they are among the risk factors that affect the inflation outlook, we directly referred