last part of my speech, i would like to mention monetary policy decisions in 2010 and the monetary policy strategy that we currently implement. in this context, i will first summarize inflation developments, and then, i will move on to monetary policy implementations within the inflation targeting framework. monetary policy decisions and implementations 33. inflation was mainly determined by tax adjustments and the course of unprocessed food prices in 2010. core inflation indicators remained low and stable as unemployment rates and capacity utilization rates hovered below pre - crisis levels. thus, inflation came down to 6. 4 percent by the end of 2010, almost reaching the year - end inflation target of 6. 5 percent. with the downward revision in food prices, the decline in inflation continued in the first quarter of 2011, and inflation rate was down to 3. 99 percent in march 2011. bis central bankers ’ speeches 34. core inflation indicator sca - h ( consumer price index excluding energy, unprocessed food, alcoholic beverages, tobacco and gold ) increased 3. 49 percent year - onyear while sca - i ( sca - h excluding processed food ) registered an all - time year - end low of 2. 99 percent. in the first quarter of 2011, despite a slight upward movement, the annual rate of increase in core inflation indicators remained relatively low. 35. although year - end inflation expectations fluctuated due to the volatile course of food prices throughout 2010, medium - term expectations remained basically unchanged. as of the first quarter of 2011, the 24 - month ahead inflation expectation stands at 6. 29 percent, hovering slightly above our medium - term target of 5 percent. bis central bankers ’ speeches 36. inflation may rise in the short term due to lagged effects of oil prices and base effect. i would hereby like to remind you that we will be more extensively providing the public with updated evaluations and forecasts on the medium - term inflation outlook along with possible risks and policy measures, in the inflation report to be published on april 28, 2011. distinguished guests, 37. following the deepening of the global financial crisis, we focused on policies to contain the adverse effects of the crisis on economic activity and financial stability, while also overseeing price stability. accordingly, our bank slashed policy rates and kept them at low levels for quite some time in addition to deploying supportive liquidity measures. 38. in view of the normalization in money and credit markets amid waning effects of the global crisis on financial markets, we

is becoming even more significant for both the global inflation outlook and the monetary policy. 6. the recovery in global economic activity has also been manifested in commodity prices, and the upward trend in commodity prices, which started following the peak of the crisis, continued throughout 2010. in this period, the strong course of economic activity in china and india, two countries that account for a significant share of global commodity demand, reinforced the upward trend in commodity prices. this trend gained pace especially in the second half of the year. 7. crude oil and agricultural commodity prices which are critical for emerging economies as well as turkey, increased sharply amid the global economic recovery. the reluctance of opec countries to raise quotas and reduction of over production by some member countries bolstered the rise in oil prices. moreover, recent political tensions in the middle east and north africa accelerated the upward trend in oil prices. adverse weather conditions in major parts of the world in the second half of the year had affected the energy and agricultural prices from demand and supply side respectively, posing additional upward pressure on prices. 8. besides increases in oil and agricultural commodity prices, 2010 was also marked by ongoing price increases in industrial and precious metals. the upward trend in the prices of precious metals in this period was primarily driven by the fact that investors use precious metals as a hedge against inflation and economic risks. in addition to these factors, the ample liquidity fuelled by the ongoing quantitative easing in 2010 by major central banks in addition to the increased inflationary risks raised the investment demand for commodities by underpinning price movements in the short term. bis central bankers ’ speeches 9. the upward trend in commodity prices poses an upside risk on inflation in both advanced and emerging economies. as a matter of fact, the effect of the recent increases in commodity prices has been materialized on inflation in many countries and more primarily in emerging economies. one reason for this is the higher share of food and energy in the consumption basket in emerging economies compared to that of advanced economies. another reason is the rapidly closing output gaps amid the strong course of economic activity in emerging economies causing higher pass through of commodity driven supply - side shocks to prices. hence, advanced and emerging economies diverge significantly not only in terms of economic activity, but also in terms of inflation outlook. 10. this divergence between growth and inflation outlook also led to differences in monetary policy practices between advanced and emerging economies in 2010. in this period, central banks of advanced economies focused on supporting the economic recovery and