I was thinking whether I should blog about appointment of the new NBP governor. My first thought was not to present my view publicly. However in recent days I heard so many unfortunate comments about it, that I decided to clarify some issues, based on my three years experience as deputy governor.
- monetary policy is determined by 10-member Monetary Policy Council, governor has one vote, which is a casting one in 5-5 vote. As in many other central banks governor influence on he decision process is stronger than any other member, because he supervises (directly or indiretly) the research staff. It is up to the governor to decide, whether he wants to build his view on the inflation prospects basing on staff input, or he disagrees with staff view or expects staff to share his view (minutes from various central banks showed that various strategies are possible). But even with this “advantage” it is still only one vote.
- central bank is a large and very complex institution. While public discussion about governor background focuses on monetary policy/economics, it is often underestimated in public discussion how important are management skills (ability to motivate people, ability to provide leadership, to create proper incentives, to synchronize bank departments’ goals with bank strategic goals, etc.).
- while governor role in decision-making process is limited to one vote, the role of governor in communicating monetary policy is much bigger. There is a large literature on this topic (you may look at the third part of my recent book – in Polish – presented on this blog for a discussion of best practices and conclusions for Polish monetary policy). Therefore the ability to communicate with markets, and ability to explain well why certain decisions have been made is fundamental. This applies especially to first comments and statements, which will be used by the markets to form their view about the new governor profile.
I hope that my brief remarks on this blog will help to draw attention to issues rarely mentioned in public discussion about appointment of the new NBP governor, issues which are of key importance for successful monetary policy conduct and for efficient functioning of this very important institution, that I am proud to be affiliated with.