First: As of January 1, 2005 we dropped six zeros from the Turkish lira. Thiswas an important development for the economy as a whole. Second: The Turkish Statistical Institution announced a change in the calculation methodology of the price indices including CPI, starting from January 2005. During 2005, in addition to these two developments, further steps were taken in order to improve conditions before starting full-fledged inflation targeting regime. We continued to develop our decisionmaking process towards more transparent and efficient policymaking. So, though the Monetary Policy Committee continued to be an advisory body in making policy decisions, it began to meet regularly on the pre-announced days to discuss developments on inflation and economy in 2005. Decisions on short-term interest rates of the Central Bank were made public on the following business day taking the evaluations during the meeting into account. Following the announcement of policy decisions, a report on inflation and outlook, which would include the reasoning of the decision and the views of the Committee members together with the signals on how the decisions on interest rates would evolve in the future, has been made public. Another step was the reorganization of the Research Department to fit the needs of policy design and analysis under the full fledged inflation targeting regime. Besides, the information set that we use to forecast future inflation was further enlarged; forecast models for inflation were improved and sophisticated. Now, let me proceed with some of the key elements of full-fledged inflation targeting regime that became effective in 2006.
We now follow a “fixed rate full allotment” tender procedure and have significantly expanded the maturity of our operations. Banks have been granted access to essentially unlimited liquidity at our policy interest rate at maturities of, initially, up to six months. This is an exceptional mode of operation. In normal times we auction a given amount of central bank credit and let competition between the bidders determine the interest rate. This unusual mode of operation implies that we currently act as a surrogate for the market in terms of both liquidity allocation and price-setting. •  Our second building block is the long list of assets that we take as collateral. This list was already very long before the crisis, but we have extended it even further and now accept an even wider range of securities as collateral. •  The first two building blocks offer unlimited refinancing against a very wide range of collateral. But they can only reach the financial system if they are coupled with the third building block, namely the very large number of counterparties that have always been able to take part in our refinancing operations. Even before the financial crisis, this number was higher than for the other major central banks. Following the changes to our operational framework in October last year, this number rose further. All these non-standard measures have now been supplemented by further exceptional steps that the ECB’s Governing Council decided to take at its last meeting on 7 May.