The lagged effects of dips in international oil prices had a favorable impact on transport services in the first quarter. Rental price movements remained quite below the averages of previous years due to the contraction of domestic demand. The prices of the restaurants and hotels group also followed a similar course owing to shrinking demand and decelerating food prices (Figure 5). I would particularly like to draw attention to the decrease of annual rent inflation. Seasonally adjusted data point to a continual and accelerating downward trend in rents in the first quarter of the year. The slowdown in services prices is expected to continue in the upcoming period as well. BIS Review 67/2009  3  Figure 4: Services Prices  Figure 5: Services Prices  (Annual Percentage Change)  (First Quarter Percentage Change)  Other Services Transportation Services Rent Restaurants and Hotels  21 18  6 2006-2007 Average  2008  2009  5 4  15  3  12  2  9  1  6  0  3 0  -1 -2  03 05 07 09 11 01 03 05 07 09 11 01 03 07 07 07 07 07 08 08 08 08 08 08 09 09  Source: TURKSTAT, CBT. Other Services  Transportation Rent Services  Restaurants and Hotels  Source: TURKSTAT, CBT. The first quarter saw a significant decline in the prices of durables excluding gold (Table 1).
Sharp decline in inflation arisen from deepened global financial turbulence-related developments allowed both developed and developing countries to make substantial cuts in policy rates (Figures 11 and 12). BIS Review 67/2009  7  Figure 11: Policy Rates in Developed Figure 12: Policy Rates in InflationCountries Targeting Developing Countries  14  5  13  4  12 3  11  2  10 9  1  8 0109  0808  0308  1007  0507  1206  0706  0206  0905  0405  1104  0104  Source: Bloomberg, CBT  0604  7  0109  0808  0308  1007  0507  1206  0706  0206  0905  0405  1104  0604  0104  0  Source: Bloomberg, CBT  Distinguished Guests, The financial crisis that erupted in the markets of developed countries deepened starting from September 2008, influencing the global financial system as a whole. This led to tremendous hikes in the risk premia of developing countries. In general, countries with low credit ratings end up with more apparent deterioration in risk premia, whereas the opposite applies to Turkey. In this period, being among developing countries having the lowest credit ranking, the decline in Turkey’s risk premium was somewhat limited. In other words, Turkey’s risk premium has resisted the deterioration in global risk perceptions more than is implied by her credit rating, thus clearly differing it from other developing countries in terms of the riskpremium-credit rating relationship (Figure 13).