How can they not dictate monetary policy? They could conceivably cause inflation by increasing mining rewards or perhaps deflation through coin destruction.
Miners don't decide what software other people run, that's why. If a miner tries to mint themselves more Bitcoin than they are due, then their block will be rejected by the network.
The scenario in question is when a small group has control of the network through consolidated hash power.
> Miners don't decide what software other people run
That would require changes to the codebase which most nodes probably wouldn't support. Which would be creating their own fork.
You can't just "increase mining rewards" as a miner.
They influence Bitcoin development (SegWit is a good example), so they dictate the Bitcoin version of policy.
It's other way around. Majority of miners were against SegWit and blocked its activation for over a year. Community then decided to collectively upgrade their nodes to accept only certain transactions. It is called User Activated Soft Fork (#UASF)
The miners had to make a decision. Mine coins that rest of the world dont want, or activate segwit.