Economics: Bank of England’s Carney to stay until January 2020 to smooth “Brexit”

Bank of England Governor Mark Carney will stay at the central bank an extra seven months until the end of January 2020 to help smooth Britain’s departure from the European Union next year, Chancellor of the Exchequer Philip Hammond told parliament on Tuesday.

Carney had been due to step down at the end of June 2019 — having extended his term by a year already to cover the immediate months after “Brexit” — but last week he told legislators he would be willing to stay longer if requested.

British media had previously reported the Treasury was keen for Carney to extend his stay and was having difficulty finding a suitable successor.

Before Carney joined the Bank of England in July 2013, he said he only wished to serve five years of the standard eight-year term for a Governor to minimise his children’s time away from their native Canada.

Hammond said Carney would provide “vital stability” for Britain’s economy during the “Brexit” transition and the extension was also welcomed by Nicky Morgan, the chair of the parliament committee which monitors the Bank and the Treasury. Meanwhile, Deputy Governor Jon Cunliffe will serve a second five-year term until October 2023, Hammond added.

Carney focused heavily on minimising financial market turmoil in the run-up to June 2016’s European Union referendum and has warned since of the costs of a disorderly “Brexit”, drawing fire from “Brexit” supporters. Nigel Farage, former leader of the “pro-Brexit” United Kingdom Independence Party, said the reappointment was “truly appalling”.

But financial markets have broadly welcomed the extension for Carney, who early during his period of office gained the moniker of an “unreliable boyfriend” due to mixed signals about the future path of interest rates.

Last November the Bank raised rates for the first time in more than a decade and increased them again last month, when Carney said that market expectations of a further rate-rise a year for the next few years would be a reasonable rule of thumb.

It would have been preferable to have avoided a piecemeal extension to Carney’s term at the Bank. But bearing in mind the uncertainties in the UK economy, we think it’s a good thing he’s staying.

Alan McQuaid (12/9/18)
Economist