the share of the euro area in turkey ’ s overall trade in goods or services will be more than 50 %. but this will not change the picture from the exchange rate policy point of view. therefore the euro could easily be substitute for deutsche mark in the present basket. - 4within the cb ’ s foreign reserves, some positions are being held in the currencies of the countries which are candidates for monetary union membership. these positions consist of securities and money market placements. it is expected that security investments will be converted to the euro as of january 1st, 1999. money market placements on the other hand will continue to be transacted in their original currencies until july 1st, 2002. the fixing of the deutsche mark rate against euro, the euro ’ s value against other currencies in the international money markets and the depth and performance of the euro bond market will be important factors in terms of our reserve management policy. in the euro market, there will no longer be any cross - currency risk and cross currency - induced interest rate differential. however, it is possible that the country risk - induced differential will become more pronounced. therefore investors must pay attention to which country ’ s security they are buying when investing in euro - denominated securities. there are also issues which should be considered by the real sector. in particular those firms which are very active in trades across borders are likely to adopt the value of the euro in their dealings rather quickly, because firms competing in european markets, in order to make comparison possible, should set their prices in euro. as i have already mentioned, the cb and the commercial banks have to convert the foreign exchange denominated accounts into the euro. this is not an easy task and involves changes in accounting systems and data processing. therefore due attention has to be paid to these infrastructural changes prior to the introduction of the euro. the fact that the eu is turkey ’ s most important trading partner increases the implications of emu for the turkish economy. on the other hand, the eu has the largest share in foreign investment in turkey, and invisible earnings in the turkish balance of payments have a significant european content. furthermore, most of our correspondent banks are in the euro zone. turkey has close trade, service and financial links with europe, as the only country connected to europe in a cu which hopefully will evolve over time towards full membership. in conclusion, i would like to point out that time is getting short for launching the

- rate corridor and the tight liquidity policy we have been implementing played a major role in shielding the economy against global shocks. moreover, our structural and cyclical measures supporting fx liquidity, core liabilities and long - term borrowing strengthened the economy ’ s resilience. 1. monetary policy and financial conditions in view of the uncertainty over global markets and the volatility in food and energy prices, we maintained a cautious monetary stance in the second quarter of 2015. in this period, we kept interest rates unchanged, but continued with the tight liquidity policy to contain risks to core inflation and inflation expectations. to meet the recently growing liquidity need, the weight of marginal funding was increased and, as a result, the cbrt average funding rate increased ( chart 3 ). the cbrt average funding rate has been hovering around 8. 5 percent since midjune ( chart 4 ). the bist interbank overnight rate, on the other hand, remained close to the upper bound of the corridor as in the previous reporting period. bis central bankers ’ speeches thanks to the cautious monetary stance, the yield curve remained nearly flat. although the yield curve has remained basically unchanged since the publication of the previous inflation report, there was a slight increase in the market rates with more than two - year maturity ( chart 5 ). thus, the spread between the overnight repo rates at the bist interbank money market and 5 - year market rates has narrowed somewhat ( chart 6 ). i would like to reiterate that we will monitor inflation expectations, pricing behavior and other factors that affect inflation closely and maintain the cautious monetary policy stance by keeping a flat yield curve until there is a significant improvement in the inflation outlook in the upcoming period. the wide interest rate corridor and the tight liquidity policy that we have been implementing reduce the economy ’ s sensitivity to global shocks, thus supporting financial stability and facilitating the attainment of the price stability objective. in the post - crisis period, the unconventional policies of advanced economies and the ongoing uncertainties over global monetary policies caused long - term interest rates in these economies to fluctuate. in addition, emerging - market rates have become extremely sensitive to global monetary policy developments. to contain repercussions on the turkish economy, we designed a monetary policy framework composed of a wide interest rate corridor and an active liquidity policy. the cbrt ’ s wide interest rate corridor and the tight liquidity policy strengthened the resilience of the turkish economy against global shocks