we know that these concepts are much better understood by the public. i truly believe that this good communication has played a very important role in the performance of the central bank in bringing down inflation. dear guests, two important developments and their possible effects on the economy made us decide the year 2005 as a transition period and adopt full - fledged inflation targeting regime in 2006. first : as of january 1, 2005 we dropped six zeros from the turkish lira. thiswas an important development for the economy as a whole. second : the turkish statistical institution announced a change in the calculation methodology of the price indices including cpi, starting from january 2005. during 2005, in addition to these two developments, further steps were taken in order to improve conditions before starting full - fledged inflation targeting regime. we continued to develop our decisionmaking process towards more transparent and efficient policymaking. so, though the monetary policy committee continued to be an advisory body in making policy decisions, it began to meet regularly on the pre - announced days to discuss developments on inflation and economy in 2005. decisions on short - term interest rates of the central bank were made public on the following business day taking the evaluations during the meeting into account. following the announcement of policy decisions, a report on inflation and outlook, which would include the reasoning of the decision and the views of the committee members together with the signals on how the decisions on interest rates would evolve in the future, has been made public. another step was the reorganization of the research department to fit the needs of policy design and analysis under the full fledged inflation targeting regime. besides, the information set that we use to forecast future inflation was further enlarged ; forecast models for inflation were improved and sophisticated. now, let me proceed with some of the key elements of full - fledged inflation targeting regime that became effective in 2006. we decided to target the consumer price index ( cpi ). it is an indicator easily followed by all economic agents and is an effective way of accurately measuring the cost of daily life. however, we also announced that because the cpi is affected easily by several disturbances that are not under the control of monetary policy, several core inflation indicators will also be monitored closely. we set the inflation target as a “ point target ” and at the same time, we set a three - year time horizon for year - end targets. the year - end targets for 2006, 2007 and 2008 are 5 percent, 4 percent and 4 percent, respectively. bearing in mind the transition from 2006 onwards to

the central bank. moreover, the report will also contain signals of likely policy changes in the future along with a general evaluation of the factors influencing inflation and an indepth discussion of general macroeconomic developments. along with the inflation report, summaries of the committee meetings will also be an important tool of communication policy. distinguished guests, as final words, i would like to mention that the inflation targeting regime is not an end in terms of monetary policy, but on the contrary, a component of an uninterrupted “ evolution ” process. so far, we have tried to strengthen the economy with the help of fiscal discipline and ongoing structural reforms. i believe the independence of the central bank and the enhanced transparency and accountability will be the main tools to cope with challenges as they were in the previous period. i want to conclude by repeating my warm welcome to you all. i hope that you enjoy both the conference and your stay in istanbul. thank you very much.