Besides, we have explicitly stated that the CBRT, in line with the strategy announced today, will not allow exchange rates to deviate from economic fundamentals, nor will it allow a deterioration in price stability and financial stability. I would like to reiterate that various measures will continue to be taken in the forthcoming period, in order to ensure price stability. 3. Risks and monetary policy  Distinguished Members of the Press, In the last part of my speech, I would like to mention risks regarding the inflation outlook and how the monetary policy will be shaped should these risks materialize. The fact that inflation will hover above the target in the short term poses risk to inflation expectations and price setting behavior. Accordingly, as of October, the CBRT has adopted a policy stance aimed at eliminating these risks. These risks will be closely monitored and the necessary measures will be taken to avoid deterioration in the medium-term inflation outlook. Medium term projections assume that the global outlook will remain weak for a long period, but the situation will not worsen further. Nevertheless, uncertainties regarding the global economy continue to be of significant concern. Especially, mounting problems regarding the sovereign debt of euro area economies continue to pose downside risks on the global economy. Concerns regarding the debt sustainability of euro area economies have further increased since the publication of the July Inflation Report, exacerbated by the concerns of a possible contagion to the region’s banking sector.
Despite the role of seasonal factors, this slowdown is more apparent compared to that of recent years (Chart 3). Accordingly, the exchange-rate-adjusted annual credit growth rate is expected to converge at around 25 percent by year-end, as envisaged. In the baseline scenario presented in the July Inflation Report, global economic activity was assumed to continue to improve gradually; however, it was also highlighted that downside risks on the global economy were growing stronger. Indeed, right after the publication of the Report, risk perceptions deteriorated rapidly and debt problems in the euro area further intensified changing the baseline scenario. In response, we introduced a comprehensive package of measures to contain the potential adverse effects of these developments on financial stability and economic activity. The objective of these measures was to supply liquidity to markets in a timely, controlled and effective manner in the event of financial turmoil that may be driven by developments in the global economy. Moreover, we opted for a modest cut in the policy rate in order to contain the risk of recession in domestic economic activity that may be posed by escalating global economic problems. Moreover, Turkish lira required reserve ratios were adjusted in order to extend the maturities of liabilities of the banking system (Chart 6). The mounting uncertainties facing the global economy since the July Inflation Report and accelerating capital outflows from emerging economies called for a series of measures intended to contain fluctuations in the foreign exchange market.