RBI defends monetary policy committee’s unanimous voting record
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Mumbai: The Reserve Bank of India (RBI) has strongly defended its monetary policy committee’s (MPC) unanimous voting record by arguing that this was the norm across many countries.
One constant criticism that the MPC has had to face was that all members were reading from the same page and there was no dissenting voice.
Thursday’s monetary policy review was the fourth under the new framework where rate decisions are decided by a committee; it was also the fourth straight instance of unanimous voting.
That, critics said, defeated the reason why India moved to the MPC framework in the first place: to encourage diverse views and debates over the setting of policy rates through a voting structure. Even the minutes of the MPC members are mere statements justifying their position, revealing very little about the debate that could have taken place.
While the minutes of the April meeting are awaited, a look at the last MPC meeting held in February shows that two out of six members did not share their view on the change in RBI’s stance from being accommodative to neutral.
However, RBI believes that it might be too early for such criticism.
In the Monetary Policy Report, the bi-annual in-depth study of inflation and growth by RBI, the central bank said that rate committees in the UK, Sweden, Thailand, Czech Republic and Hungary have seen full consensus decisions between October 2016 and February 2017.
However, others such as US Federal Reserve Open market Committee (FOMC) and Bank of England’s MPC have seen many differences while setting policy. But these differences were over the size of the change in policy rate and not the overarching policy stance, said the report.
According to the RBI, typically divergences stem from MPC members’ policy preferences—the relative weight on price stability and output stabilization and also their assessment of expected economic conditions, and the evolution of inflation and output gaps.
Going by this trend, one could argue that RBI is simply trying to align itself with global central banking standards which follow “material differences in views but marginal differences in votes”.
This is not the first time that the RBI has compared its MPC functioning with other similar panels around the world. In October 2016, RBI had done a survey of 15 countries on the number of MPC meetings and the press conferences that usually follow these meetings, explaining the rationale behind the decision.
“A survey of country practices suggests a central tendency among major central banks to hold four press conferences a year, although the number of MPC meetings may be higher,” the statement had said.