structural factors specific to the transition period and will continue for a certain period of time. but it is also believed that at this stage it does not require any monetary policy response. it is predicted that this situation will gradually be back to normal with the harmonization of housing supply. the contribution of the increase in the services group to 2006 inflation is forecasted to be around 2. 3 - 3 points. accordingly, the goods group inflation should be realized at about 3 percent in order to achieve the 2006 target. however, the acceleration in price increases in the items that is not under the control of the monetary policy, such as fresh fruits and vegetables, oil, basic metal and gold, reduces this possibility. at this point, it is meticulously emphasized that price increases in the said items are to a large extent temporary and that monetary policy will not react strongly as far as the secondary effects remain limited. another basic risk relating to the upcoming period is the difficulty in foreseeing the global risk appetite and the course of international liquidity conditions. the improvement in the quality of current account financing and favorable developments in public finance in the recent period are considered to increase the endurance of the economy against likely shocks. however, it is a fact that any shock that may come from the said direction in the current situation carries with it the potential to affect our economy unfavorably. in case of such an event, our aim will be to ensure the consistency of inflation with the medium - term targets. in this context, by diffusing the policy reaction over time, the impact of exogenous shocks will be eased without any harm to price stability. distinguished guests, price stability is a sine qua non precondition with respect to macroeconomic stability and sustainable growth. significant steps have been taken in this direction. the cbrt will continue to fulfill its tasks in carrying these achievements forward. it should be kept in mind that the main factor, which is determinant in the sustainability of non - inflationary growth, is the confidence in the permanency of macroeconomic stability. in this context, along with the ongoing determination regarding structural regulations that improve the quality of fiscal discipline, the continuity of reforms that will develop competition and investment environment, thus supporting productivity increases in the long term, is of critical importance. thank you. annex : annex graph 1. private sector investments and credit use ( annualized ) billion us dollar thsnd ytl 9. 5 8. 0 6. 5 5

foreign exchange deposit accounts with credit letters in the long - term also increase the importance of the level of the bank ’ s foreign exchange reserves under the floating exchange rate regime. therefore, the bank holds foreign exchange buying auctions in order to increase the reserves at their disposal at times when the foreign exchange supply gradually increases above foreign exchange demand due to the rise in reverse currency substitution tendency and capital inflow. in the following periods, a reverse dollarization process will take shape and capital inflow will increase due to the favorable developments regarding european union membership negotiations in addition to the completion of studies about the new three - year program concerning the continuance of fiscal and monetary discipline and structural reforms. taking into account these predictions and the fact that a strong reserve position will boost confidence in the current program, the central bank has resumed the foreign exchange buying auctions that were suspended on april 27, 2004 starting from december 22, 2004. unlike previous periods, a yearly program of auctions has been announced in order to minimize the effects of foreign exchange buying auctions on the foreign exchange market and exchange rates. in this way, it will be possible to minimize the effects on foreign exchange supply and demand conditions and stick to the main principles of the floating exchange rate regime. secondly, the central bank may intervene in the foreign exchange market directly in the event of excessive volatility in exchange rates in either direction that could threaten the price stability target. the bank analyzes the reasons of the volatility in the foreign exchange market thoroughly in daily and periodical terms and takes the intervention decision by taking into account the likelihood of future volatility by considering past data. in the upcoming period, economic agents will probably continue to hold domestic currency as a result of further achievements in economic stability, and capital inflow will increase. foreign exchange buying auctions to control volatility might continue in the event of actual or likely excessive volatility in the foreign exchange market induced by the above - mentioned conditions. i would like to draw your attention to another point about the floating exchange rate regime. the exchange rate is determined in the market under supply and demand conditions, which may turn the exchange rate into a risk factor. undoubtedly, the exchange rate should be accepted as a cost factor and closely monitored by decision - making bodies in open economies. in this framework, foreign trade firms and other agents, which hold short foreign exchange positions, may face significant risks as a result of exchange rate movements. however, it should be noted that the vol