a permanent goal. inflation inflicts several burdens on a society : · overall, it introduces uncertainty into economic decisions and profit seeking. · it reduces the discipline of price and market systems. · it has negative effects on the cost of capital. · it directs resources to unproductive activities. in periods of high inflation, investments in real estate and financial investments become more desirable. · growth declines as inflation rises. in countries with high inflation, it has been observed that most resources are directed to the financial system. it is also known that the financial system undergoes a relative expansion during such periods. resources which have accumulated in the financial system cannot be rechannelled by the financial system to more productive sectors. a stable financial system and stable prices therefore represent the normal environment that central banks are committed to pursue and maintain. a central bank that stabilizes prices increases its credibility. a central bank that protects the value of the currency also helps increase the credibility of the country. the success of the monetary policy implemented to stabilize prices depends on whether or not the financial system is stable. and the price stability and financial system stability that are the primary responsibilities of the central bank are necessary for achieving economic growth in the medium term. let me mention some qualities that a central bank should have : · it should have continuity. central banks should not be diverted from their permanent goal of price stability by short - term political pressures. · it should be competent. a central bank should be completely professional. it should be technically dedicated in its structure, thorough and clear in its expression, and transparent in its actions. · it should be a responsible institution. in other words, it should be an institution that is reliable and able to justify its monetary manoeuvres. these are the characteristics of a modern central bank. central banks that have these qualities will unquestionably occupy a distinguished place in the international environment of the 21st century. i am sure that its long experience, accumulated knowledge and proficient staff make the central bank of the republic of turkey an institution that can fulfil these expectations. i am proud of this institution. i owe a great debt of gratitude to my colleagues, who have greatly contributed to our accomplishments and to our policy implementation.

, which prompted the us fed to begin to consider slowing the pace of extraordinary monetary policy accommodation it has been providing. this does not mean an imminent tightening of policy by raising short term interest rates, but rather beginning to cut back on the pace of asset purchases, currently at us $ 85 billion per month. the reaction to the announcement by the fed in may that tapering would begin relatively soon took many analysts and market participants by surprise, and underlined just how nervous markets are, and how elevated the uncertainty is. what was meant to be an orderly adjustment threatened to become precisely the opposite, despite the assurances by the fed that tapering would be done in a responsible manner. long - term bond yields and mortgage rates in the us increased by about 100 basis points. the spillover effect on emerging markets was intense, with bond yields generally increasing by more than in the us, as bond flows reversed sharply – since may about us $ 20 billion has flowed out of emerging bond markets, with r17 billion net sales by non - residents in the domestic bond market between 22 may and the end of august ; and emerging market currencies, including the rand, depreciated markedly across the board. although there was a general expectation that tapering of quantitative easing would begin in september, there was a great deal of uncertainty around the pace and timing, and the period between the may and the september fomc meeting was highly volatile. in the event, the fed refrained from tapering in september, out of concern about the slow pace of recovery in the us labour market ; the unresolved fiscal issues in the us which could lead to further fiscal contraction when the debt ceiling is reached, possibly in mid - october ; and the negative impact of tight financial conditions and higher long term interest rates on the nascent housing market recovery in the us. the reaction of the markets to this surprise was dramatic, with strong recoveries in bond and equity markets, while the dollar weakened across the board. however, it is inevitable that the fed will have to begin tapering at some stage, and markets are likely to react or over - react to any data coming out of the us that is likely to have a bearing on us monetary policy decisions. we have been given a taste of what is to come, and we are in for a difficult and bis central bankers ’ speeches volatile period ahead. this is unchartered territory, and whatever the us does is going to have spillover effects onto the