The last central bank bender

Eight of the twenty-three analysts surveyed by business channel CNBC-e expect the Central Bank of Turkey (CBT) to cut its policy rate of 8.25 percent at the monetary policy committee?s rate-setting meeting on Jan. 20.

Similarly, while almost none of those polled by the CBT for its monthly survey of expectations expected a rate cut at last month?s meeting, or in the next three months for that matter, some do now, as reflected in the mean of policy rate expectations: 8.13 percent at the end of current month and 7.81 percent three months ahead. The respective figures were 8.25 and 8.20 percent last month.

So what happened in one month? For one thing, inflation came in lower than expected. But if you look at research reports, you?ll see that almost no economist who expects a rate cut gave favorable price developments as a rationale, listing last week?s global economic developments instead.

U.S. economists surveyed regularly by the Wall Street Journal pulled back their expectations of the timing of the Fed?s first rate increase last week, but the real eye-catchers were in Europe. An adviser to the European Court of Justice said on Jan. 14 that the European Central Bank (ECB) could legally buy Eurozone government debt to stabilize the currency area?s economy, in effect giving the green light for the next round of stimulus expected to be announced on Jan. 22.

It would still have been too risky for the CBT to bet on the ECB decision two days after its own rate-setting meeting, but the Swiss National Bank (SNB) sealed the deal, at least in the eyes of markets. The SNB?s decision to unexpectedly scrap its policy of capping the franc against the euro on Jan. 15 was perceived as preparation for the ECB?s quantitative easing.

Some analysts...