High and chronic inflation culminated in the adoption of short-term approaches, by adversely affecting expectations, investment and production decisions and deteriorating resource allocation in the economy, which brought along low and volatile rates of growth and employment and aggravated injustice in income and wealth distribution. We have experienced all the damage of inflation in Turkey, so we expect all sections of the public to support our fight against inflation and defend the achievements we have made so far. It should be borne in mind that striving for price stability means striving for creating an environment where people can make a living, make investments and can look to the future with confidence. With this respect, price stability is a goal that cannot be sacrificed for any other priority or target. Thanks to the policies implemented by our Bank, great progress was made in the disinflation process: inflation, which was 73.2 percent at the beginning of 2002, was recorded as 10.26 percent in August 2006. Within the framework of the fight against inflation, the Central Bank of Turkey adopted the formal inflation-targeting regime as the monetary policy strategy at the beginning of 2006. Now, I would like to mention a few points that I believe are important with respect to the adoption of the inflation targeting regime. Studies on the inflation targeting regime as a monetary policy strategy were initiated at our Bank in 2000.
Lastly, I would like to emphasize that the level of the current account deficit is not so important in terms of ensuring that it does not follow a volatile course and is not perceived as a significant risk factor. However, in an environment where turbulences are observed in the markets and uncertainty perceptions are increasing, it is reasonable to expect a surge in the perceptions of fragility in the current account deficit, as well as the popularity of these perceptions. The current account deficit is a closely followed indicator. We are also aware of the risk potential of the current account deficit and have been carefully monitoring it in coordination with other agents responsible for the economy. Dear guests, I was most honored to be here in Malatya and to have the chance to share my views on the Bank’s policies and macroeconomic developments with you today. Thank you. 10  BIS Review 89/2006