For Icelandic banks, it is therefore extremely important that CDS spreads decline, even though it is not clear what could cause it to do so in the current climate. 4  BIS Review 25/2008  At the end of last month, Moody’s Investor Service announced that the outlook for the credit ratings of two Icelandic banks had been downgraded from stable to negative, and that the outlook for the third bank remained negative. A decision on whether their credit ratings would be changed was to be expected within the month. This announcement came perhaps as no surprise, in view of the changes in the banks’ credit ratings from Moody’s over the past year. If they are downgraded by one notch, Glitnir and Kaupthing will revert to the credit rating they enjoyed before Moody’s announced the implementation of its so-called Joint-Default Analysis methodology early last year. Landsbanki’s current rating is two notches above that a year ago. In contrast with Moody’s, Fitch Ratings recently affirmed its ratings for Iceland’s banks and changed its outlook for Kaupthing Bank’s rating from negative to stable. It should be noted that many banks have been subjected to changes in their credit rating outlook. For example, Standard & Poor’s changed its outlook for many of the world’s largest and bestknown banks from stable to negative. Among the banks affected were Deutsche Bank, Dresdner Bank, Barclays Bank, UBS, Credit Suisse, and others of their ilk.
0112  1011  0711  0411  0111  1010  0710  0410  0110  1009  0709  0409  0109  1008  0708  0408  0108  1007  0707  0407  0107  1006  0706  * CBRT Business Tendency Survey results from the second survey period. 1009  3.0  4  *Calculated using linear interpolation of several maturity yields in the CBRT Expectations Survey. Yields are from the second survey period. Source: CBRT. 4  BIS Review 143/2009  The sharp fall in inflation observed over the past year is not peculiar to Turkey. Inflation rates have plummeted all over the world since the peak of the crisis due to downward pressures arising from demand and cost conditions. Although there has been a slight increase in rates with the removal of the high base effect of the previous year in the third quarter (Figure 11), core inflation data indicate that the main trend of inflation in both developed and emerging markets is downward (Figure 12). Figure 11: CPI in Developed and Emerging Figure 12: Core CPI in Developed and Markets Emerging Markets (Annual Percentage Change)  (Annual Percentage Change)  5  Developed Markets  8  4  Emerging Markets (rhs)  7  4  Developed Markets Emerging Markets  6  3  5  2  3  4  Source: Bloomberg, CBRT. 2.