In principle, the central bank governor embodies everything capital markets hold as intrinsic truth when he says consumer expectation surveys will facilitate forward-looking monetary policy. There can be no arguments with the other assertion at SBP’s centre for survey research either, that such exercises help gauge inflation expectations and economic confidence of households, in addition to popular reaction to policy formulation and subsequent economic implications.
But coming to the factual, public feedback, though important, accounts for precious little when central bank autonomy is compromised. Perhaps the good Dr Ishrat Husain, himself a former SBP governor and Director IBA, the support institution for the CSR initiative, should have made a point of this, considering how central bank printing presses continued to undermine its core price-stability function even as he praised the initiative. For, as things stand, monetary policy is haphazard at best, and not because the public feedback loop hasn’t existed so far.
We, along with numerous stakeholders, have endlessly debated the erosion of monetary policy due to the government’s borrowing excesses. First, when rates were jacked up, the government didn’t stop borrowing, diluting the anti-inflationary impact of the hawkish policy stance, leaving nothing to show for sidelining private sector investment in crunch time. Then, when rates dropped dramatically, the government still kept borrowing, crowding out crucial private sector investment critical to snapping out of chronic stagflation. Expecting public opinion to influence interest rate and money market decisions in such circumstances amounts to ridiculing the very people consulted for the exercise. Mr Anwar’s initiative is appreciated, though it should have been preceded by a visible show of safeguarding the bank’s autonomy, so much of the work now being done is not just another waste of time and resources.