Twenty-one analysts have unanimously forecast a continuation of the overnight borrowing rate, at 6.5 per cent. There was some disagreement about year-end interest rates, however: in a poll of 19 analysts, one saw the rate rising to 9.0 per cent, three to 8.5 per cent, one to 8.25 per cent, 11 to 8.0 per cent, two to 7.75 per cent and one to 7.5 per cent. The weighted average forecast was 8.09 per cent.

From Reuters:- Moody’s Investors Service has just upgraded Turkey’s government bond rating to Ba2 from Ba3, reflecting the rating agency’s growing confidence in the government’s financial shock-absorption capacity. The outlook was changed to stable from positive. Fitch moved late last year to put Turkey on BB+.

Timothy Ash, an analyst at Royal Bank of Scotland, said: “It’s a bit disappointing that Moody’s only moved one notch, as this still leaves Moody’s rating of Turkey one notch behind Egypt, which I have long failed to understand… answers on a postcard as to why Turkey should be rated behind Egypt. Obviously Moody’s was ‘inspired’ by the hugely successful eurobond issue earlier this week ($2bn placed, and $7bn in orders). Clearly, investors are voting with their feet, irrespective of the views of the ratings agencies.”

The Turkish central bank has stopped cutting rates, holding the overnight borrowing rate at 6.5 per cent and the lending rate at per cent. The bank’s press release said: “Strong base effects would be observed in forthcoming periods… leading to a significant increase in annual inflation, especially in
December, yet core inflation would remain at low levels. The Committee has emphasized that it would be necessary to keep policy rates at low levels for a long period of time.”

Other rates were also held: the late liquidity window interest rates (4pm – 5pm) kept the borrowing rate at 2.5 per cent and the lending rate at 12 per cent, and the interest rate on overnight and one-week maturity borrowing facilities (provided for primary dealers via repo transactions) at 8 per cent.