Considering the fact that the relationship between macroeconomic variables changed remarkably along with the structural transformation in the economy after the 2001 crisis, it is assessed that the mentioned uncertainty in Turkey is at least as high as those in other countries. However, in light of the recent normalization experience, it is possible to produce forecasts about the period required for monetary policy to influence inflation. The latest observations indicate that the period needed for monetary policy measures to affect domestic demand varies between 3 to 9 months, while the change in demand influences inflation in a period between 3 months and 1 year. This leads us to the conclusion that the impacts of monetary policy on inflation spread over a period of one and a half years on average. In this context, taking into account the lagged impacts of monetary policy, the Central Bank defined the policy horizon as approximately one and a half years in the main policy statement published last year. Although it is forecasted that the impact of monetary policy on inflation will show itself in a more lagged manner and that the control horizon may be extended as the normalization process of the economy continues, the control horizon is maintained as one and a half years at this stage. There is no doubt that this period may be extended or shortened depending on the extent of shocks and the period needed for their influence to reflect on prices.
Based on the information currently available, the level of the liquidity in the market in 2007 (i)  The increase in base money,  (ii)  Coupon and principal redemption by the Treasury to the Central Bank,  (iii)  Treasury’s foreign exchange debt payments financed by its domestic currency borrowing  will have a lowering effect, while (i)  The Central Bank’s net foreign exchange purchases,  (ii)  Interest payments to be made by the Central Bank for reserve requirements and for excess liquidity absorbing transactions,  (iii)  The decline in Treasury cash accounts with the Central Bank will have an increasing effect on liquidity. Based on the assumption that the foreign exchange payments of the Treasury would exceed the foreign exchange inflow, and by taking the Central Bank FX buying auction program into consideration, the excess liquidity in the market is expected to continue within reasonable limits in 2007, even though temporary liquidity shortages may occur. However, as in previous years, it is not possible to make a precise forecast regarding the net foreign exchange payments of the Treasury, the amount of the Central Bank’s foreign currency purchases and the balance of Treasury cash accounts with the Central Bank. Depending on the variations of these variables, the market liquidity may change significantly.