serve as a nominal anchor in the short term. inflation targeting regime is one of the monetary policy regimes and all regimes have their own rules and frameworks. our main policy document published in december 2005 describes the framework of our inflation - targeting regime. 24th paragraph of that document states that : “ a pre - announced inflation target shall only be changed in the event that very sharp and long - term deviations from the target are expected or medium - term targets no longer make sense due to factors beyond the control of monetary policy. at this point, a new target will be set with the government with respect to the law. ” the paragraph that i have just read completely defines the recent conditions and explains why we revised the inflation targets for 2009 and 2010. under these conditions, a revision in inflation targets has become a technical necessity. therefore, the central bank of turkey proposed the government to revise the targets for 2009 and 2010 to 7. 5 and 6. 5 percent, respectively ; and to set the target for 2011 at 5. 5 percent, and the government accepted our proposal. i would like to re - emphasize that, we will not treat the revised targets symmetrically. monetary policy will aim to keep inflation below the revised target path. dear guests, we stick to our price stability objective. at the same time, we are aware of challenges we have to face. first of all, the rapid rise in food prices may be more permanent than expected due to rapid economic growth, slowdown in agricultural productivity and employment shift from agriculture to industries. considering the fact that food has a higher share in the consumption basket of developing economies, including turkey, this would lead to a decoupling in inflation rates between industrialized world and developing countries for years to come. similarly, commodity prices may remain elevated for the foreseeable future, which may prove to be a challenge for turkey in particular. note that turkey is a net commodity importer in contrast to many other developing countries. last, but not least, price stability necessitates stability in financial markets. we need to put our house in order to attract foreign capital with long - term horizon, rather than highly mobile short - term capital. i believe structural reforms together with macroeconomic stability, fiscal discipline and prudent monetary policies will create the necessary economic environment to achieve and maintain sustainable growth rates and price stability in the future. thank you.

that frequent changes in targets are likely to have adverse effects on inflation expectations and pricing behaviors, which could damage the credibility of the future commitments. for this reason, it is important in the upcoming period that targets should be left intact as long as inflation is expected to converge to targets within a reasonable period of time. transmission mechanism and control horizon central banks in both developed and developing countries experience serious uncertainties regarding the lagged effects of monetary policy on inflation. considering the fact that the relationship between macroeconomic variables changed remarkably along with the structural transformation in the economy after the 2001 crisis, it is assessed that the mentioned uncertainty in turkey is at least as high as those in other countries. however, in light of the recent normalization experience, it is possible to produce forecasts about the period required for monetary policy to influence inflation. the latest observations indicate that the period needed for monetary policy measures to affect domestic demand varies between 3 to 9 months, while the change in demand influences inflation in a period between 3 months and 1 year. this leads us to the conclusion that the impacts of monetary policy on inflation spread over a period of one and a half years on average. in this context, taking into account the lagged impacts of monetary policy, the central bank defined the policy horizon as approximately one and a half years in the main policy statement published last year. although it is forecasted that the impact of monetary policy on inflation will show itself in a more lagged manner and that the control horizon may be extended as the normalization process of the economy continues, the control horizon is maintained as one and a half years at this stage. there is no doubt that this period may be extended or shortened depending on the extent of shocks and the period needed for their influence to reflect on prices. the impacts of various shocks on inflation may differ according to time and period. as a consequence, the period required for inflation to converge to the target again will be announced after the occurrence of shocks and the determination of their sources, if there is a significant deviation from the target. forecast horizon the forecasts presented in the inflation reports published throughout 2006, covered a period of one and a half years. from 2007 onwards, forecasts will refer to a two - years period. this change aims to help economic agents to predict the future better. furthermore, forming a comparable forecast period with the results of the expectations survey will provide us with the opportunity to analyze and assess inflation forecasts more easily. 1 inflation forecasts and interest rate path while