A tale of two central banks (and two presidents)

Governor Erdem Ba?ç? did indeed save the best for last during his briefing on the Central Bank?s first Inflation Report of the year on Jan. 28. At the Q&A session, he said the monetary policy committee (MPC) would cut interest rates at an emergency meeting on Feb. 4 if annual inflation fell more than one percentage point in January.

It is important to note that this is not really a conditional statement. All but one of the twenty-three economists surveyed by business channel CNBC-e expect yearly inflation to decrease more than one percentage point when the official statistics are released on Feb. 3- more due to favorable base-year effects than a disinflationary trend.

This is not the first time the Bank has convened an emergency meeting. Most recently, the Bank responded to the Turkish Lira?s rout last January with an emergency hike at the end of the month. There was even an emergency cut at an ?interim meeting? on Aug. 4, 2011, when the Bank reacted to eurozone woes, only to raise rates significantly at the regular meeting on Oct. 20, 2011, when it became apparent they had acted prematurely. There have also been times when the Bank announced the direction of policy rates before a meeting.

But there was always a justification, even for the Bank?s premature 2011 cut. This time, there is no economic explanation for why the MPC could not wait three weeks, until their regular meeting on Feb. 24, to cut rates. On the contrary, they took an unnecessary risk with this commitment. What if the mood towards emerging markets turned sour and pressure on the lira increased before Feb. 4?

In fact, this is exactly what happened right after Ba?ç??s announcement. As a result, the Bank had to release a short statement on Jan. 30,...