Monetary Policy Committees: Comparing Theory and "Inside" Information from MPC Members

How do monetary policy committee (MPC) members form their views about the appropriate level of the interest rate? To what extent do they change their minds during the deliberations in the policy meeting? How important is the chairman? These are issues discussed and analyzed in the literature but so far with limited evidence of how this actually works in practice. We asked former and serving MPC members in Sweden and Norway. The responses confirm a number of theoretical assumptions and predictions, but some results also challenge the conventional view of monetary policymaking by committees. For instance, there seems to be rather limited pooling within the committee; input from the staff is more important than input from other MPC members. Members tend to have decided beforehand how to vote at the policy meeting, and they have a firm idea of what the positions of their colleagues will be. We also find that there is a preference for the status quo regarding institutional features in both central banks, implicitly suggesting that the exact institutional setup is not crucial. One way of interpreting this would be to say that the two central banks have managed to establish processes that, according to the respondents, ensure the quality of policy decisions irrespective of the institutional setup.