Sorry, guys, for the long hiatus. We had to go globetrotting to get inputs for the global position of MPC and here it is presented in the table below. During the hiatus, lot of water has flown and India rocked the world with an incredible policy measure in the form of demonetization. We are recovering from the impact of the policy and I am sure it will have its impact on the monetary policy of the MPC of India. We would urge you to read the minutes of the second meeting of the MPC held on December 6 & 7, 2016 at the following link www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=38984
As you can see from the table below, globally monetary policy is determined by a committee and the structure and framework are comparable among nations. The table below captures the salient features of a MPC or by whatever name it is called. You will observe that there is convergence in the thinking of the central Bankers throughout the world that the monetary policy of a nation is made by debate by a panel of experts. The many-heads-are-better-than-one approach may also provide the Governor of the central bank more comfort in decision making.
| Central Bank | BoE | Fed | ECB | RBNZ | BOJ | BN | India |
| Name of the MPC | Monetary Policy Committee | The Federal Open Market Committee (FOMC) | Governing Council | Monetary Policy Committee | Policy Board – Monetary Policy Meetings (MPMs) | MPC | MPC |
| Size of MPC | 9 | 12 | 25 | Not fixed | 9 | 7 to 11 | 6 |
| Of the above Other Members | 4 external members | All Federal Reserve Bank Governors | 19 external members** | Senior Officials | 6 external members | No specific number. Currently 2 | 3 External Members |
| Appointment of external members by | The Chancellor | President (confirmation by the Senate) | Heads of state or Government | MPC has no legal basis and is not a decision-making committee | The Cabinet | Board Governance committee recommends | Government of India |
| Government Representation | One member of Treasury with no voting power | No | No | No | No | No | |
| Monetary Policy Objective | Inflation targeting | Committee reviews economic & financial conditions, determines appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC is mainly responsible for Open Market Operations |
Decisions relating to monetary objectives, key interest rates, the supply of reserves in the Eurosystem, and the establishment of guidelines for the implementation of those decisions. |
To consider, and advise the Governor on, issues relating to formulation and implementation of monetary policy. Governor is the sole monetary policy decision maker. |
Price Stability | The Monetary Policy Committee is responsible for formulating monetary policy and policies for the conduct of monetary policy operations. Monetary policy is autonomously formulated and implemented by Bank Negara Malaysia, as mandated in the Central Bank of Malaysia Act 2009. |
Inflation Targeting. The Financial Market Committee (FMC) meets daily to review the liquidity conditions so as to ensure that the operating target of monetary policy (weighted average lending rate) is kept close to the policy repo rate. |
| Voting Rule | By majority; chairman has casting vote | By majority; chairman has casting vote | Rotational system | None | By majority; chairman has casting vote | Each member of the MPC has one vote, and in the event of an equality of votes, the Governor has a second or casting vote. | |
| Veto power | No | No | No | No | No | No | No |
| No. of Meetings in a year | 8 | 8 | Once in 6 weeks for MP | weekly | 8 | 6 | Minimum 4 |
| Transparency & Disclosure | Minutes published in the Bank of England Website. Inflation report is published once in a quarter | Minutes published in the Federal Reserve Website. | Minutes published in the European Central Bank Website | Monetary Policy Statement is published in the website of Reserve Bank of Newzealand website | Minutes published in the Bank of Japan Website | Minutes published in the Bank Negara, website as mandated by the Central Bank of Malaysia Act, 2009 | Minutes published in the Reserve Bank of India website |
BoE – Bank of England
FED – Federal Reserve Bank, USA
ECB – European Central Bank – The Governing Council is the main decision-making body of the ECB
** The governors of the national central banks of the 19-euro area countries.
RBNZ – Reserve Bank of New Zealand
BoJ – Bank of Japan,
BN – Bank Negara, Malaysia
We would stop the blog on MPC with this edition. We are sure the readers have benefitted by the compilation. We enjoyed writing the blog and we hope the readers enjoyed reading the same… Bye