At that time, the long “fiscal dominance” history of the Turkish economy that severely restricted the efficiency of monetary policy and shallow financial markets that were not well developed were the primary characteristics of the Turkish economy. All these limited the economy’s room for maneuver on the eve of the adoption of the new monetary policy regime. Independence of the Central Bank of Turkey that came in 2001, was almost the only institutional factor in hand at that time on the way towards the ultimate objective of price stability. Given this overall framework and conditions, the Central Bank of Turkey preferred a smooth transition towards inflation targeting whereby it would wait until all these factors that restrict the efficiency of monetary policy would weaken. In early 2002 following the achievement of relative stability in financial markets after the 2001 Crisis, the Bank announced its new monetary policy regime in a public statement as implicit inflation targeting. As it was emphasized in the same now historical statement, the final aim was to adopt the full-fledged inflation targeting regime, once the preconditions were met. This ‘new’ regime was defined as inflation targeting since the central bank announced a numeric target for annual inflation jointly set by the government according to its law and price stability was now its primary objective. Furthermore, it was similar to inflation targeting in the sense that the decision making process was shaped in a forward looking manner by exploiting the broadest set of information available.
Süreyya Serdengeçti: Inflation targeting – performance and challenges Opening speech by Mr Süreyya Serdengeçti, Governor of the Central Bank of the Republic of Turkey, at the Conference on Inflation Targeting: Performance and Challenges, Istanbul, 19 January 2006. *  *  *  Ladies and gentlemen, I would like to welcome you all. It is a great honor for me to open this conference entitled “Inflation Targeting: Performance and Challenges”. I am very pleased to host such distinguished guests and I’d like to thank you all for joining us here in Istanbul and share your knowledge and experience on inflation targeting. The inflation targeting regime has been adopted by a growing number of countries, especially by emerging market countries, in the last fifteen years. As economic and political conditions of emerging market countries have generally been considered as vulnerable and unstable, these countries perceive inflation targeting as a credible and a safe “way out”, after the successful experiences of industrialized countries. Turkey is now the newest member of the club. We have studied the experiences of more than 20 industrialized and emerging market countries as we were working on the general framework of the inflation targeting regime for Turkey. Along with these experiences, historical, socio-political and economic dynamics of the Turkish economy have been taken into account to create a model that is specific to Turkey. I believe that those countries who will adopt this regime in the future will benefit from our experience as we did from others.