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Policymakers' votes and predictability of monetary policy

ABSTRACT: Though the vast majority of central banks currently entrust the conduct of monetary policy to a committee, only nine banks release the voting records of policymaking meetings, either immediately together with the policy decisions or within three weeks. Only in Poland are the voting records released with six weeks delay, after the subsequent policy meeting. This unique situation provides an interesting opportunity to investigate whether the disclosure of votes could help to predict the forthcoming policy decisions. Using real-time data, this paper shows that a prompter release of the voting records could improve the predictability of policy decisions. The voting patterns reveal strong and robust predictive content even after controlling for "policy bias" statements and responses to inflation, real activity, exchange rates and financial market indicators. They contain information not embedded in the spreads and moves in the market interest rates, nor in the explicit forecasts of the next policy decision made by market analysts in Reuters surveys. Moreover, the direction of policymakers' dissent explains the direction of analysts' forecast bias. These findings are based on the voting patterns only, without the knowledge of policymakers' names attached to each vote.

KEYWORDS: monetary policy · predictability · policy interest rate · MPC votes · real-time data