June 30, 2013 12:24 pm

Formidable to-do list awaits new Bank of England governor

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The Bank of England©Bloomberg

The Bank of England

When Mark Carney enters Threadneedle Street, the new governor will be met with a formidable to-do list: revive the economy, tame inflation and shake-up the Bank of England, bringing its practices into the 21st century.

Among his first commitments will be a maiden monthly monetary policy briefing ahead of the interest rate decision on Thursday.

After that, focus will turn to two big issues likely to dominate his first 100 days in office: the appointment of a new deputy-governor and moves to revolutionise the setting of monetary policy in Britain.

He has already changed the way the BoE communicates, bringing advisers from Canada and also importing his practice of giving speeches, immediately followed by press conferences. The first such event is scheduled around a £45 a head lunch in late August organised by business groups in the East Midlands.

With the departure of Paul Tucker, the deputy governor for financial stability, in the autumn, Mr Carney will be instrumental in appointing a successor and must decide whether to appoint from within the BoE or seek another outsider.

The advert for the £260,000 a year role has already been posted on the Cabinet Office website with a closing date of 15 July and senior staff know the decision might determine their career futures. With interviews at the end of the month, a decision can be expected quickly.

Another vacancy will arise next summer when Charlie Bean, deputy governor for monetary policy, retires, meaning there will be a clean sweep of all top positions in the BoE.

Richard Barwell, a former bank official now at RBS said there would be a lack of experience at the top: “The Old Lady has come to depend on Mervyn, Charlie and Paul for intellectual leadership. I don’t know who Carney is going to turn to for in-depth advice when those three are all gone”.

But the most immediate policy decision will come in early August, when the BoE must come to a settled view about how it wants to guide the markets and the public over where interest rates and quantitative easing will go next.

First, Mr Carney will have to persuade BoE officials that his idea on guidance passes muster against a background of institutional scepticism. Most public in his criticism has been Spencer Dale, chief economist, who lambasted it in a 2009 speech, saying, “I truly have little idea as to how long [the] bank rate will need to be maintained at its current low level in order to meet the inflation target. As such, it would make little sense to commit to a rule that suggested I did”.

As a very persuasive man takes charge of an extremely hierarchical organisation, it is likely that Mr Dale and others will change their minds. But with the crisis still far from over, events will matter as much as any grand plan of the new governor.

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