keep inflation in line with targets over the medium term. to this end, we provide a numerical range for the annual rate of credit growth in order to be more concrete. i would like to underline that these growth rates should not be perceived as strict targets for the cbrt. at this point, i would also like to emphasize that the nominal credit growth consistent with the medium - term inflation target may vary over the years depending on the course of factors such as inflation, growth and the composition of the aggregate demand. as illustrated on the slide, over the next three quarters, inflation may display significant fluctuations mainly due to base effects driven by food prices. accordingly, annual food inflation is expected to rise in the second quarter, decline in the third quarter, and increase markedly in the last quarter ( chart 15 ). comparison of january 2011 and april 2011 inflation report forecasts chart 16. chart 17. output gap forecast inflation forecast source : cbrt. source : turkstat, cbrt. comparing our current forecasts with those of the previous reporting period, i would like to reiterate that we revised the initial point of our output gap forecasts upwards due to the more - than - expected increase in the domestic demand in the last quarter of 2010 ( chart 16 ). however, taking into account the stronger - than - expected effects of the monetary tightening implemented in the first quarter, the output gap is expected to close at a slower pace compared to the previous period. in sum, due to developments beyond the monetary policy control such as the significant surge in oil and other imports prices as well as the renewed tariffs, we have revised our inflation expectations upwards ( chart 17 ). in addition, i would like to remind you that we will not respond to first round effects of rising oil and other commodity prices, but second round effects will be closely monitored and deterioration in the pricing behavior will not be tolerated. it should be emphasized that any new data or information regarding the inflation outlook may lead to a change in the monetary policy stance. therefore, assumptions regarding the monetary policy outlook underlying our inflation forecasts should not be perceived as a commitment on behalf of the cbrt. 3. risks and monetary policy in the last part of my speech, i would like to mention risks regarding inflation outlook in the upcoming period and prospective monetary policy strategies to be implemented should these risks materialize. bis central bankers ’ speeches we envision that the impact of the ongoing monetary tightening on loans and domestic demand will be more apparent starting from the

- term approaches in the economy. all of this damage caused by inflation should always be kept in mind. therefore, price stability is an indispensable objective that cannot be renounced for any other priority or aim. accordingly, the central bank of turkey sets its policies with a medium - term perspective – independent of daily policies and politics – entirely towards price stability, its primary objective. in 2006, the central bank of turkey adopted the formal inflation targeting regime as monetary policy strategy within the framework of its objective to achieve and preserve price stability. it is of great importance to comprehend this regime and the accountability mechanism with regards to inflation targets and the course of inflation. therefore, let me touch on a few elements of formal inflation targeting. before all else, the point that i would like to emphasize is that our inflation targets are point targets. these targets have been set as consumer price index inflation. our policies are established solely with the aim of achieving these targets. in our monetary policy implementations, we have announced our inflation targets for a three - year period in order to increase the emphasis placed on medium - term. in this context, the inflation target is 5 percent for 2006 and 4 percent for 2007 and 2008. to apply a rule to the central bank ’ s accountability in the event of any deviation or the possibility of deviation from the inflation target, a + 2 point - uncertainty band has been established around the point target. once again, i would like to underline the significance of this issue. this band, which has been formed around the inflation target, aims at setting the accountability criteria. looking at the practices around the world, we see that a 40 percent - uncertainty band has been formed around the point target in most countries. our implementation is based on this approach. in the event that inflation is realized outside this band or, in case of such a possibility, the mechanisms specified with respect to accountability will start. with the introduction of the formal inflation targeting regime, interest rate decisions are made by voting at the monetary policy committee meeting. monetary policy committee meetings are held once a month on pre - announced dates. nevertheless, when deemed necessary, extraordinary meetings may be held, such as yesterday ’ s meeting. despite the significant distance covered in the fight against inflation, price stability has not been achieved yet and there is still a long way to go. recent inflation developments also confirm this fact. at this point, i would like to summarize the inflation and monetary policy developments of the recent period. the increase