group prices indicate that the prices in restaurant and hotel services as well as transportation prices remained considerably below the rates of increase of the same period of the previous year. nevertheless, annual inflation rates in services, which are referred to as ‘ labor intensive services ’ and whose prices cannot be directly managed and are not directly influenced by energy prices, have followed a stable course in the past year. moreover, the realization of price increases in rents at almost the same rates of the previous year due to the lack of immediate housing supply against increasing housing demand in the first quarter of 2006 also points to the unfavorable impact of the said prices on consumer prices throughout the year. in this context, demand developments towards services and productivity developments are being carefully monitored and we maintain our scrutiny of these developments ( graph 4 ). graph 4. prices of services ( quarterly percentage change ) 7. 87 2005 q1 2006 q1 5. 19 4. 264. 08 3. 85 3. 02 2. 41 1. 751. 80 1. 27 services rent transportation services restaurant and hotels other services source : turkstat, cbrt. analyzing the course of prices in durable consumption goods, excluding gold prices, that have continued their high - rated upward trend within the framework of developments in international markets, the annual rate of increase of the said prices entered a downward trend as of august and this trend continued to accelerate in the first quarter of 2006. a reverse in the tendencies of both furniture prices, which may be an indicator of consumption demand and prices in the electrical and nonelectrical devices group, including technology - intensive goods open to competitiveness in general and susceptible to the exchange rate developments as well, are major determinants of this trend ( graph 5 ). graph 5. prices of durable goods ( excluding gold ) ( annual percentage change ) - 5 durable goods ( excl. gold ) - 10 furniture - 15 electrical and non - electrical equipments mar - 06 jan - 06 nov - 05 sep - 05 jul - 05 may - 05 mar - 05 jan - 05 nov - 04 sep - 04 jul - 04 may - 04 mar - 04 jan - 04 - 20 source : turkstat, cbrt. considering the fact that seasonal price movements are determinant in consumer prices, it will be helpful to analyze the special cpi aggregates ( sca ), excluding seasonal products, with respect to the course of inflation. the decline in the annual rate of increases in the sca - e * index that has

course, crude oil prices entered an upward trend in the last period. due to the difficulty in making a precise forecast relating to oil prices, while producing inflation forecasts under the main scenario, it was assumed that oil prices would follow a horizontal course at their current level. hence, a level above that assumed in the first inflation report was foreseen. in this context, the assumptions about oil prices were updated upwards while producing forecasts. finally, a number of assumptions were made on the likely course of the risk premium throughout 2006 and 2007. the favorable outlook for the course of the risk premium specified in the first inflation report was preserved for the first two months of 2006. however, both the deterioration tendency in the global risk appetite and the increase in the uncertainty perceptions about the bank of japan ’ s liquidity policy led to a rise in the risk premium in march. nevertheless, in line with the easing of uncertainty perceptions during the last period, the forecasts given in the last chapter of the report are based on the projections that the change in global liquidity will be moderately realized and international liquidity conditions will not experience any sudden changes. interpretation of forecasts distinguished guests, as i emphasized in the introduction to my speech, it takes a certain period of time for the monetary policy decisions to manifest their effect on the economy. taking this fact into consideration, the central bank establishes its monetary policy under a medium - term perspective and focuses on the consistency of future inflation with the target, not that of today ’ s inflation. in this framework, since it is considered that the average control horizon of monetary policy on the economy involves a period of time of one and a half - years, the forecasts are presented so as to include the remaining three quarters of 2006 and the first three quarters of 2007. graph 25. inflation and output gap forecasts forecast range * output gap ± 2 uncertainty band - 1 - 2 7 : 03 7 : 02 7 : 01 6 : 04 6 : 03 6 : 02 6 : 01 5 : 04 - 3 * the probability of inflation staying within the forecast range is 70 percent. ♦ the path ‘ consistent with the target ’ which is announced in 5 december 2005 ‘ ’ general framework of inflation targeting regime and monetary and exchange rate policy ’ and constitutes the base for the principle of “ accountability ”. • 2006 end - year point target. ♦ the path consistent with the 2007 end - year target, under contemporary data set. the inflation forecasts given in graph 25 were made under