since 2005. hourly wages for parttime workers have posted year - on - year increases since 2003, and the rate of increase rose gradually through 2006. looking forward, wages, including those for men, are expected to rise steadily as labor market conditions become increasingly tight. with the number of employees increasing steadily, household income has continued rising moderately and private consumption has been firm. a more distinct upward momentum in private consumption is likely to emerge as the adverse effects from temporary factors - - such as last year's weather conditions ( a long spell of rainy weather in early summer as well as the unseasonably warm winter weather ) and consumers'reluctance to buy before the introduction of new products - - fade and wages resume their upward trend reflecting improved labor market conditions. b. production and inventory adjustments production exhibited high quarter - on - quarter growth of 2. 6 percent in the october - december quarter of 2006, but a downward reaction to this high growth coupled with adjustments in the it - related sector will likely suppress growth in the january - march quarter of 2007. unlike inventory adjustments in itrelated goods during 2002 - 03 and 2004 - 05, adjustments this time seem largely due to weaker - thanexpected demand for cellular phones and new game consoles, although the impact of the introduction of a new personal computer operating system has still to be fully ascertained. c. developments in consumer prices the year - on - year rate of change in the cpi ( excluding fresh food ) was flat in january, and depending on developments in crude oil prices and foreign exchange rates, it may turn slightly negative in the short term. from a longer - term perspective, however, consumer prices are expected, over time, to display trend increases given that the economy has expanded at an annual rate of around 2 percent over the last four years and that the expansion is expected to be long - lasting. with the continuing economic expansion, the utilization rates of production capacity and of labor have been rising steadily, and they are expected to increase further. as the recent tankan ( short - term economic survey of enterprises in japan ) indicates, corporate managers are increasingly feeling shortages of production capacity and labor, while a positive output gap suggests that demand currently exceeds supply in the economy as a whole. since autumn last year, upward movement in the cpi has been subdued partly because of sluggish growth in private consumption and wages. however, the cpi is expected to resume a moderate upward trend as the effects of the drop in crude oil prices fade

the global financial crisis has led to a significant slowdown in economic activity in turkey as in other developing countries. a remarkable tightening in lending conditions and a surge in interest on loans were experienced during the worst period of the financial crisis. the easing of concerns over inflation has allowed the central bank of turkey to focus on curbing the potential destruction of the crisis on the turkish economy without conflicting with the primary goal of maintaining price stability. the majority of policy rate cuts to compensate the additional tightening in financial conditions was antedated. subsequent data releases on inflation and economic activity have bolstered the credibility of the central bank. i would like to underline the gradual decline in interest rates on commercial loans as a positive development in this period. the common denominator of the central bank ’ s policy preferences and the recent choices should also be emphasized. the primary objective of the central bank is to achieve and maintain price stability and this primary objective does not conflict with any other objective of the bank. the policy stance we have recently adopted clearly reflects this. although recent data releases indicate that the worst may be over, the recovery is expected to be protracted given credit market problems and rising unemployment rates. the tightness in financial conditions still persist to some extent, and uncertainties regarding the impact of the problems across financial markets on the real economy are ongoing, suggesting that downside risks still remain. although downside risks are still more significant, recent signs of partial recovery in economic activity should not be discarded. nonetheless, we are of the opinion that most of the recent increases in economic activity were attributable to the short - term effects of the global fiscal measures implemented. there needs to be a robust revival in consumer demand in order for the increases in the capacity utilization rate to be sustainable over the medium term. uncertainties regarding aggregate demand and lower capacity utilization continue to suppress fixed capital investments. the current trend in investment demand is far from signaling a robust economic recovery. subsequent to the recent rate cuts and fiscal measures, we anticipate that domestic demand in turkey might gain relative stability in the second quarter of 2009 and growth will post positive figures from the last quarter onwards. in other words, the recovery in the turkish economy might start earlier than that of the global economy. our expectation is underpinned by two main factors. the first of these is the sound and stable structure of our financial system. the restructuring plans along with regulatory and supervisory reforms, which were put into effect in the aftermath of the 2001 financial