One of the necessary conditions for the success of inflation targeting in the medium- and long-term is ensuring the soundness of financial sector, along with a central bank that can freely use its monetary policy instruments. These are just some of the important factors lying behind the restructuring efforts in the Turkish financial system in this period. With the increased efficiency resulting from adjustments in financial markets, the Central Bank will be able to pursue a monetary policy aimed at price stability. Here I would like to present some information on the monetary policy to be implemented in this transition period that will pave the way for inflation targeting in the medium- and long-term. The Central Bank will keep its interventions in the foreign exchange markets limited under the floating exchange rate system, but will only move to reduce volatility in exchange rates in case of excessive fluctuations. The Central Bank will support disinflation efforts by keeping monetary aggregates under control, and in addition, the monetary policy will be directed at achieving financial stability. The Central Bank will continue monitoring the targets on Net International Reserves and Net Domestic Assets, which are among the basic items on its balance sheet. These targets will be set also by considering financial stability. The money creation of the Central Bank against the increase in the money demand will be carried out by considering the indicative path for Net Domestic Assets.
In the near future, Turkey will unquestionably attain an economic and social level it deserves by reaching a social consensus and by taking appropriate policy actions today. Thank you all for listening to me. 4  BIS Review 35/2001