by the cbrt. accordingly, we estimate that the contribution of these developments to inflation would have reached 6 percentage points, had the cbrt not taken any policy measures. in this scenario, consumer inflation reaches double digits at 10. 1 percent, owing mainly to the excessive depreciation of the turkish lira, also coupled with the effect of the deterioration in inflation expectations ( table 2 ). therefore, given the backward looking pricing - behavior in the services sector, inflation would hover at elevated levels for an extended period of time. this would lead to a deterioration in inflation expectations, and risk the hard - earned recent bis central bankers ’ speeches achievements on the path to price stability. in such a case, bringing inflation back to reasonable levels would be more costly. in order to prevent such adverse developments, the cbrt intervened actively in the foreign exchange market ; and in line with its primary objective of price stability, responded boldly by increasing overnight lending rates significantly. besides, we have explicitly stated that the cbrt, in line with the strategy announced today, will not allow exchange rates to deviate from economic fundamentals, nor will it allow a deterioration in price stability and financial stability. i would like to reiterate that various measures will continue to be taken in the forthcoming period, in order to ensure price stability. 3. risks and monetary policy distinguished members of the press, in the last part of my speech, i would like to mention risks regarding the inflation outlook and how the monetary policy will be shaped should these risks materialize. the fact that inflation will hover above the target in the short term poses risk to inflation expectations and price setting behavior. accordingly, as of october, the cbrt has adopted a policy stance aimed at eliminating these risks. these risks will be closely monitored and the necessary measures will be taken to avoid deterioration in the medium - term inflation outlook. medium term projections assume that the global outlook will remain weak for a long period, but the situation will not worsen further. nevertheless, uncertainties regarding the global economy continue to be of significant concern. especially, mounting problems regarding the sovereign debt of euro area economies continue to pose downside risks on the global economy. concerns regarding the debt sustainability of euro area economies have further increased since the publication of the july inflation report, exacerbated by the concerns of a possible contagion to the region ’ s banking sector. in this context, the cbrt will continue to monitor global economic developments closely and will take

the state - owned banks ’ structural problems, is putting substantial constraints on the monetary policy actions, making financial markets more fragile. in view of this important issue, the state - owned banks have started to lessen their overnight borrowing from other banks and non - banking institutions in the short - term by obtaining liquidity from the central bank through repurchase or outright selling transactions against government papers given by the treasury to cover their duty losses. a similar process is running for the banks taken over by the saving deposits insurance fund. the central bank and the treasury are absorbing the excess liquidity from the market through reverse repurchase transactions and through selling government papers. dear shareholders, distinguished guests and valuable press members ; in view of the current economic conditions, the economic literature also indicates that, pursuing a tight monetary policy to stabilize exchange rate right after the emergence of crises has certain setbacks. although a post - crisis policy implementation can reduce the fluctuations in the exchange rates, the resulting higher interest rates will negatively affect both the domestic debt stock and the real sector. furthermore, i believe that once the setbacks are eliminated right after the crisis and once the amendments are made in the central bank act, we will be able to use short - term interest rates actively as a monetary policy instrument in the medium - term. a more efficient monetary policy implementation will be ensured through easing the fiscal burden on the financial markets and through reinforcing the banking sector, which will lay the ground for inflation targeting. in the near future, we will continue to do the technical works for inflation targeting. these works will include, choosing an appropriate price index ; determining a transmission mechanism that would show how monetary policy instruments might influence the prices and how the pressures might come up on the prices ; determining a targeting band and its period. in short, the central bank will shift from a post - crisis policy aimed at short - term financial stability toward price stability, once the necessary conditions have emerged. let me point out that, developments in november 2000 and in february 2001 highlighted once again the importance of achieving the structural and financial reforms, which is one of the keystones for the medium - and long - term stability of the economy. at this point, i would like to underline that the existence of a healthy financial system can be considered as a public good with substantial positive externalities. once the system is relieved from the burden of the state - owned banks, both the borrowing costs will decline and the central bank will get an upper hand in its