a volatile trend in the first half of 2011 due to the base effect and to gain stability slightly above 4 percent in the medium term ( figure 32 ). at this point, i would like to underline once more that any new data or information regarding the inflation outlook may lead to a change in the monetary policy stance. therefore, i would particularly like to highlight that assumptions regarding future stance of monetary policy underlying the inflation forecasts should not be perceived as a commitment on behalf of the cbt. 4. risks in the last part of my speech, i would like to elaborate the risks regarding the inflation outlook in the upcoming period and prospective monetary policy strategies to be implemented should these risks materialize. developments regarding global economic activity would continue to be the main factor shaping inflation dynamics and the monetary policy outlook. recently, leading indicators of economic activity continue to slow down, underscoring downside risks especially regarding the us economy. furthermore, ongoing problems in credit, real estate, and labor markets across developed economies and uncertainties regarding the impact of fiscal consolidations suggest that the downside risks regarding the pace of global growth are likely to persist for some time. should the global economy face a longer - than - anticipated period of anemic growth, the monetary tightening envisaged to start in the final quarter of 2011 under the baseline scenario might be postponed. moreover, an outcome whereby global economic problems intensify and contribute to a contraction of domestic economic activity, may trigger a new easing cycle. by contrast, monetary tightening may be implemented at an earlier stage, should the recovery in economic activity turn out to be faster than expected. the weakness in the global economic outlook not only delays recovery in external demand but also leads to continuing expansionary monetary policies across developed economies, which in turn fuel domestic demand through an acceleration of capital inflows to emerging markets. should capital inflows continue, the divergence in the growth rates between domestic and external demand is likely to intensify in the forthcoming period. additional policy instruments, other than the short - term policy rates, would be needed to curb risks emanating from this channel. in this respect, should the disparity between domestic demand and external demand continue and be accompanied by rapid credit expansion and deterioration of the current account balance, all to lead to financial stability concerns, it would be necessary to utilize other monetary policy instruments such as reserve requirement ratios and liquidity management facilities more effectively. food and commodity price inflation has accelerated recently. the aggregate demand

would be maintained, have all contributed to turkey ’ s relatively better performance. turkey ’ s risk premium indicators performed better than many countries and continued to remain below pre - crisis levels ( figure 4 ). consequently, interest rates have declined, the stock market soared, and the turkish lira strengthened ( figure 5 ). 1. inflation developments dear members of the press, having summarized the current global conditions, i would now like to share my evaluation of inflation developments in turkey that occurred in the last quarter. in the third quarter of 2010, consumer prices and the annual inflation rate went up to 1. 15 percent and 9. 24 percent, respectively ( figure 6 ). this rise in inflation can be attributed to the sharp increases in unprocessed food prices. meanwhile, the decline in annual services inflation and the positive outlook in prices of staple goods continued ; and the main trend of inflation maintained its course consistently with the medium term targets. thus, rates of quarterly change in all sub - categories remained well below the average figures of past years with the exception of food prices ( figure 7 ). in the third quarter, food prices recorded a sharp increase driven by unprocessed food prices. thus, the contribution of food prices to annual inflation reached 4. 2 percentage points ( figure 8 ). unprocessed food prices, which saw sharp slumps in the second quarter, showed substantial increases in the third quarter, bringing annual unprocessed food prices inflation to the historically highest level of 28. 74 percent ( figure 9 ). while fresh fruits and vegetables prices became determinant ; the persisting surge in meat prices became another factor influencing the rise in the group prices. at this point, i would like to underline that the fluctuating course in unprocessed food prices increases the volatility of consumer inflation and thus creates significant forecast uncertainty. in the third quarter, while energy prices followed a horizontal course due to the developments in oil prices, the inflation trend in core goods excluding food, energy, alcoholic beverages, tobacco and gold maintained its low level. meanwhile, the decline in annual services inflation became more marked than expected. services prices excluding food and transportation, the sensitivity of which is relatively higher against demand, recorded its lowest level ( figure 10 ). the steady downward tendency in core inflation indicators continued in the third quarter due to this beyond expected slowdown in services prices ( figure 11 ). the reverberations of the strong course of the turkish lira on