Governor Başçı's Speech in Press Conference for the Presentation of the Inflation Report-III (Ankara, 30/07/2013)

Distinguished Guests,

Welcome to the press conference held to convey the main messages of the Inflation Report. I will now present an overview of the report, which will be published on our website soon.

The report typically summarizes the economic outlook underlying monetary policy decisions, shares our evaluations on macroeconomic developments and presents our medium-term inflation forecasts, which were revised in view of the developments in the last quarter, along with our monetary policy stance. In addition to the main text, the report includes nine boxes entailing interesting and up-to-date analyses on various topics. For example, the report presents a box to contribute to a better understanding of the dynamics regarding the underlying trend of the current account balance in recent years. What is more, there are studies elaborating on the effects of the reserve options mechanism and our liquidity policy. There is also a box analyzing the effects of domestic cost factors on inflation. We also included studies on the hours worked and exports dynamics in the non-farm sector regarding the real sector in this report. Titles of the boxes are shown on the slide. All of these shed light on noteworthy issues in the Turkish economy. I strongly recommend that you read these boxes, which will soon be published on our website.

Now, I would like to convey the main messages of the report. Firstly, I will review the global economic outlook given its undeniable influence on our policies.

Developments regarding the global monetary policy influenced financial markets in the second quarter of the year. Persisting fragilities in the global economy in addition to increased uncertainty over the monetary policies of advanced economies led to higher volatility in the risk appetite (Chart 1). In particular, the Fed’s signals for a pullback on bond purchases in the near future have resulted in capital outflows from emerging economies as of May (Chart 2).