BNM is under MOF, ie Zeti reports to Najib. The governor advises the Finance Minister on the policies, but it is the Minister who makes the final decision. Governor is the government servant just like IGP and AG who carry out daily operational jobs. But the government of the day decides the overall policies, including setting interest rates

If Anuar becomes the PM and Zeti doesnt carry out his instruction, he can fire her

My Economics 101 I studied in uni tells me the government makes fiscal and monetory policies to stimulate the economy. Fiscal policy = Budget. Monetary policy = interest rates, QE1,2,3, forex etc

This post has been edited by EddyLB: Jun 13 2012, 09:29 PM

Just for discussion sake....if Anwar becomes the PM, and wants Zeti to carry out some populist policies which go against what Zeti thinks is right, what will happen ?

Yes, I agree Zeti will resign too. And will be replaced by Anwar's people (let's say Azmin). Azmin will execute what Anwar instructs him to do. So, essentially, monetary policies are part and parcel of the government's policy. Ie BNM = Government. Zeti cannot go against what the Finance Minister wants her to do

If Zeti is thick skin and refused to resign (for whatever other reasons) and go against Anwar's policy, Anwar cannot just directly announce she is fired. She is entitled to serve out his tenure because she is appointed by the Agong under the Central Bank of Malaysia Act 2009, and not the PM or Finance Minister. But Anwar is having control of the Parliament, which he can table amendments to the Act and give power of appointment back to PM. So, at the end, he can still fire Zeti, albeit longer process.

Let's not debate on whether the government or the BNM's expert policy is good for the country and the economy. But if a government agencies (police, attorney general, auditor general, TNB etc) does not follow the instruction of the government of the day, then the government cannot function properly. It is not good for the country