one of the most interest rate – sensitive parts of the economy. we have seen that sensitivity in mortgage rates and mortgage originations. as shown in figure 4, 30 - year fixed - rate mortgage rates were close to 3 percent when the federal funds rate was near the zero lower bound in 2020 and 2021. rates surged in 2022 as the federal funds rate increased. consistent with the increase in mortgage rates, mortgage origination volume has fallen significantly. the current restrictive stance of monetary policy has weighed on the housing market. that is helping to bring supply and demand into better balance and put downward pressure on inflation. one aspect of inflation that has gotten a fair amount of attention is housing and rental costs. this is because housing costs make up such a large share of household budgets. to calculate housing services inflation, government statistics don ’ t use home prices because a home is partly an investment. instead, housing services inflation is computed using monthly rents that capture what tenants pay to rent a house or apartment and what homeowners would, in theory, pay to rent their own home. the way this calculation is derived means changes in market rents — or what a new tenant pays to rent — take a long time to pass through to pce housing services prices, as shown in figure 5. in this figure, notice that increases in market rents, the blue and red lines, peaked in 2022, and pce housing services inflation, the black line, lagged market rents and peaked in 2023. lags in housing services inflation the primary reason for this lag is that market rents adjust more quickly to economic conditions than what landlords charge their existing tenants. this lag suggests that the large increase in market rents during the pandemic is still being passed through to - 6existing rents and may keep housing services inflation elevated for a while longer. this observation is important because it is an example of one of the underlying sources of lags with which monetary policy affects inflation. another factor affecting pass - through of restrictive monetary policy is that fixedrate mortgages are common in the u. s. it is often argued that this loan structure dampens the effect of monetary policy. figure 6 shows that the 30 - year fixed mortgage rate is about 7 percent, while the average outstanding mortgage rate is about 4 percent. this lower outstanding mortgage rate is due to households who locked in rates during lowerinterest periods, including when the fed cut the target range for the federal funds rate to near zero shortly after

where the central bank continues to cut policy rates gradually... ” • july 2006 : “... in addition to the measures of june, the central bank will implement measured monetary tightening in the rest of 2006 and cut policy rates gradually in 2007... ” • october 2006 : “ under the scenario that the central bank maintains its tight stance until the last quarter of 2007 and cuts policy interest rates afterwards... ” as it is clearly seen above, as long as there was not a significant shock in the economy, the central bank acted in parallel to its earlier statements. however it had to revise its monetary policy stance after important shocks such as the market volatilities of may and june. it is more evident in light of these this example that, as it is frequently emphasized in our announcements, the interest rate path, which is used by the central bank in producing forecasts, should not be perceived as a commitment to be followed in every case. hence, the interest rate risk should be assessed by considering the fact that the outlook presented in the inflation report is subject to change depending on the data flow, and thus, the policy perspective can be updated whenever necessary. since the end of 2005, the central bank has repeatedly drawn attention to this matter via the inflation report and other policy documents. special cpi aggregates and core inflation instead of considering a single so - called core indicator, the central bank uses more than one indicator in the differentiation of various exogenous shocks. thus, depending on the source of shocks, different indicators may stand out from time to time. for instance, the index that excludes the energy item in a period where oil prices display high increases or the index that excludes the unprocessed food group in a period where agricultural prices fluctuate excessively may contain more comprehensive information in order to achieve a better understanding of the main inflation trend. special cpi aggregates produced will continue to be a part of the forward - looking inflation analysis and the communication policy of the central bank. as of 2005, turkstat started to publish 7 special cpi aggregates and beginning from september 2006 the h index composed by excluding energy, alcoholic beverages - tobacco, unprocessed food, and gold has started to be published. currently, even though the h index seems to be relatively in the forefront, it should be kept in mind that this index is sensitive to developments in fx rates and it could provide incomplete information in periods when fx rates are highly volatile. in