At its meeting on 21 June 2004, the Monetary Council of the Magyar Nemzeti Bank decided to prepare abridged minutes of all of its rate-setting meetings over a trial period of six months. After expiration of the trial period, the Council would decide on regular publication at the end of the year, on the basis of experience gained. On 6 December, the Council made a favourable evaluation of experience obtained during the trial period and decided to publish abridged minutes of its regular rate-setting meetings, in accordance with international experience. This summary presents the arguments and experiences supporting the publication of the Council’s meetings and the debates at the meetings as well as the structure of the abridged minutes published.
I. Transparency of the monetary policy decision-making process – international experiences and economic considerations
With the adoption of the inflation targeting regime, the MNB’s monetary policy has become significantly more transparent for economic agents. Consistent with the monetary policy strategy of inflation targeting, the MNB has also adopted a wide spectrum of communication tools used by central banks operating in the most transparent way, including those of the UK, Sweden and Canada. Transparency of the decision-making process has so far been the only exception: the pre-decision debates and views within the decision-making body have not been public.
Greater transparency of the decision-making process, i.e. the publication of summary materials, abridged minutes, division of votes and individual opinions, is justified by the fact that it can help market participants to obtain a more detailed picture of the factors underlying the decisions and of the Bank’s assessment of macroeconomic conditions. This, in turn, helps market participants to make more accurate forecasts, enhances the predictability of monetary policy conduct and gives the Bank more room to guide expectations.
Making available pre-decision debates in the summary helps analysts and the wider public monitoring the Bank’s operations to gain insight into questions such as whether the decisions have been taken unequivocally, or whether and how support behind different views has changed from one meeting to another. This contributes to the better predictability and comprehensibility of shifts in the direction of monetary policy implementation. All this is supported by empirical studies, providing evidence that votes cast and summaries are indeed new and useful sources of information for economic agents.
Based on theoretical considerations, another argument in favour of publishing the division of votes cast and opinions is that publication also strengthens the responsibility of the decision-making body. In addition, the publicity of views and debates may offer protection against potential political pressure, as the public may check Council members’ commitment to deliver and maintain price stability, the core duty of the central bank defined by law.
II. The Monetary Council’s decision to publish abridged minutes of its meetings
Taking into account international experience, the considerations in academic literature as well as the implications for monetary policy, the Monetary Council has decided to publish abridged minutes of its regular rate-setting meetings.
The arguments in favour of enhancing the transparency of decision-making are as follows:
· It makes clear the complexity of decision-making: available data and macroeconomic relationships are insufficient for a perfect understanding of the given state of the economy, and the Monetary Council strives to take an optimal policy decision in view of the related uncertainties, by using all available pieces of information;
· It suggests that decision must be taken after due consideration of a number of often conflicting viewpoints, for example, the potentially different, short and long-term time frames of decisions;
· It shows that there are always many alternatives for choice, which can equally be defended and challenged; and, finally
· It throws light on the fact that collective decision-making is more complex than individual decision-making, and so a final decision is always the end result of a dynamic process.
The Monetary Council has decided to present individual views in the abridged minutes in a way that they cannot be linked to any of the members, with generalised phrasing, and publishing the numerical division of votes. This solution makes it possible to extensively utilise the advantages inherent in transparency by improving the clarity and predictability of decisions.
The Council will approve the abridged minutes and publish them in accordance with its release calendar. In constructing the release calendar, making the abridged minutes available for the public before the next rate-setting meeting will be given priority.
III. Contents of the abridged minutes
In defining the contents of abridged minutes, the Monetary Council has adopted the structure applied in international practice. Generally, abridged minutes presenting central banks’ decision-making process contain a review of macroeconomic developments underlying the decisions, then present the most important issues as well as the arguments and counter-arguments discussed at meetings. The section of minutes providing an overview of economic and financial developments is in fact a summary of an assessment prepared by central bank experts. Then, the minutes continue with council members’ evaluation of recent macroeconomic developments and their expectations of future developments as well as their pre-decision-making debate.
Taking account of these features, the abridged minutes of the Monetary Council’s meetings are also divided into to sections. This first presents economic and financial developments, together with new information which has become available since the latest meeting. It is essentially a brief summary of analyses prepared by Bank staff for the Monetary Council. This section of the minutes is basically a description of actual developments. The second section of the abridged minutes contains an evaluation by decision-makers, relying on the first section, and a description of the debate over the final decision taken. The abridged minutes attempt to make clear the developments and data which have received the greatest attention, and to present the opinions voiced as comprehensively as possible, in accordance with their weight and the degree of support from members.
A basic objective of the abridged minutes is to provide information about monetary decision-makers’ considerations and opinions. In accordance with this goal, guests attending the meetings without a right to participate in decision-making is not contained in the abridged minutes.
It should be noted that the publication of full details of certain questions discussed at meetings carries risks. Disclosure of particulars on debates of issues related to the exchange rate regime and considerations in regard of central bank interventions in the foreign exchange market may, in certain cases, jeopardise the efficiency with which the required monetary policy actions are taken. Therefore, the abridged minutes do not necessarily contain information related to the exchange rate regime and interventions in the foreign exchange market. However, as the forint exchange rate plays a central role in debates and assessments related to decisions, the Council deems it important to publish considerations about and opinions on the exchange rate which are different from those noted above.
IV. Extraordinary meetings
Due to the potential shocks which may affect the economy and financial markets, it may happen that the Monetary Council decides on the key policy rate at any meeting other than its pre-scheduled rate-setting meetings which are held once a month. At such extraordinary meetings, the Council will decide on the publication of the abridged minutes, including the date of publication, after taking account of international experience.