6  BIS central bankers’ speeches  Accordingly, we based the projections on a stronger domestic demand outlook for the first half of 2013 compared to the previous reporting period. On the other hand, external demand remains subdued. This period did not see a notable change in global growth projections; hence there was no significant revision in exportweighted global growth index (Chart 19). Accordingly, our forecasts are based on an outlook that entails a mild increase in exports driven by market and product diversification as in the previous report. Chart 19. Export-Weighted Global Economic Activity Index* (2008Q2=100)  * For methodology, see Inflation Report 2010–II, Box 2.1 “Foreign Demand Index for Turkey”. Source: Bloomberg, Consensus Forecasts, CBRT. In short, in line with the developments in domestic and external demand, the contribution of aggregate demand conditions to disinflation is envisaged to be larger in the second quarter of 2012; but smaller at the start of 2013 compared to the previous report. Overall, given the lagged effects on inflation, I would like to state that the revision in the output gap did not bring about a noticeable effect on the end-2013 inflation forecast. As you all know, food, energy and import prices also play a great role in inflation forecasts. Therefore, before moving on to forecasts, I will briefly talk about our assumptions regarding these variables. The outlook for import prices did not exhibit a notable change in the interreporting period (Chart 20).
Comparison of October 2012 and January 2013 Inflation Report Forecasts Inflation Forecasts  Source: TurkStat, CBRT. Output Gap Forecasts  Source: CBRT. The same slide presents the revision in the output gap forecasts. We revised the output gap upwards for the first quarter of 2013 due to recent acceleration in capital inflows and credit growth. However, we assumed that the policy measures would drive the output gap and credit path closer to the October forecast in the second half of the year. BIS central bankers’ speeches  9  We can summarize the main message of the forecast regarding the monetary policy as follows: a cautious monetary policy stance should be maintained to keep inflation close to the target at the end of 2013. It is important that the CBRT does not disregard excessive volatility in credit and exchange rates, for macro financial risks to be contained. It should be kept in mind that keeping credit growth at healthy and reasonable levels will support both price stability and financial stability. In fact, notwithstanding the recent faster-than-expected growth in credit, we envisaged that credit growth would hover around 15 percent. I would like to once more underline 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.