Indian central bank threw a googly to most experts by cutting repo rate in today’s policy. Most experts/analysts expected a status quo for sometime but got a rate cut in the first meeting of the new Governor (This piece argues markets expected a rate cut!).
This was also the first time when we had an MPC deciding rates. So the statement was titled as: Resolution of the Monetary Policy Committee (MPC). Usually the word central banks use is decision but here it is resolution which means a firm decision. Interesting choice of word usage.
Then came the usual analysis. The only change was the decision, sorry resolution given by the committee:
Six members voted in favour of the monetary policy decision. The minutes of the MPC’s meeting will be published on October 18, 2016. The next meeting of the MPC is scheduled on December 6 and 7, 2016 and its resolution will be announced on December 7, 2016.
All central bank chiefs/committees want to create an impression of a hawk. They do not want to be seen as cutting rates in the first meeting itself of both the new chief and the new committee. But the new regime does not care for any such image.
Meanwhile, the Indian financial media and experts continues to spin stories on the Indian central bank. Calling it growth batting, dovish and so on. Just a while ago we were told how the new appointment would be a continuation of hawkish policies. It is amazing how there is no case of any introspection whatsoever.
One was just curious to ask this question. Given this decision, would media and experts reactions be same if govt appointed a Finance Ministry official as head of central bank? Or even if it appointed MPC members from finance ministry. It is highly unlikely as then talks of compromising independence etc would have started. The same news would have changed to Finmin insiders at RBI and so on.
It is less and less to do with economics per se. More and more is about the image management by the media.
One is also reading how this was the shortest media interaction ever. Some have pointed how the new chief just wanted to exit the conference hall asap. This is itself a dramatic turn around from the previous regime which had glamorised the whole thing way beyond imagination. This is a welcome development as things at central bank will hopefully be low key from hereon. But this means less noise for the media which just is so interested in central bank matters.
It is a case of mixed and confused signals really. The central bank will most likely try and minimise the noise around it but the media just wants to maximise given the hangover of the previous regime.