In this framework, the expected short-term interest rate path is calculated via the yield curve, expectations survey and other sources and inflation forecasts are published under the assumption that this path will materialize. (iii)  Countries in which central banks assume that interest rate will remain fixed over the forecast horizon: England, Brazil, Peru, and Australia. 2  In recent years, both academic literature and current central banking implementations increasingly support the approach adopted by the first group, including Turkey for sharing the own expectations of the central banks about future monetary policy with the public corresponds to the transparency and  1  In the survey, the farthest period of time given for inflation expectations is 2 years. 2  Some central banks follow more than one method while producing forecasts about interest rates. For instance, Bank of England is in both the second group (expectations for market interest rates) and third group (fixed interest rate). BIS Review 1/2007  3  predictability principles of inflation targeting. In this context, it is observed that more countries from second and third groups join the first group each year. Monetary policy and interest rate risk As mentioned above, the Central Bank shares its forecasts about monetary policy verbally with the public. When evaluating the inflation and monetary policy outlook, a particular question to be answered is raised: How should the policy perspective that will keep inflation close to the target in the medium-term (in a period of one and a half years to two years) be?
Therefore, the Central Bank targeting a variable such as FX rate, growth or current account deficit is out of the question. The Central Bank shares with the public the general framework of the current exchange rate policy and FX buying auctions in the press releases it has issued each year since the start of 2002. As also stated in these press releases; (i)  In the current floating exchange rate regime, exchange rates are determined by supply and demand conditions in the market and the Central Bank does not have any exchange rate target. (ii)  Since there is no exchange rate level to maintain in countries with floating exchange rate regimes, the level of foreign currency reserves is much less significant compared to countries with fixed or flexible exchange rate regimes. However, especially in emerging economies such as Turkey, a strong FX reserves position is significant in removing the unfavorable effects of potential internal and external shocks and boosting confidence in the country’s economy. In addition, taking into account the foreign debt payments of the Treasury and the need to gradually reduce the number of high-cost remittance accounts in the long-term, which are peculiar to Turkey and make up a significant part of the liabilities side of the Central Bank’s balance sheet, the Central Bank holds foreign exchange buying auctions to build up reserves at times where foreign exchange supply constantly increases compared to foreign exchange demand.