A FOREIGNER has entered the walls of a hallowed English institution, with an immediate and contentious issue to address on his first day in the job – whether or not to sell Wayne Rooney. And in a similar situation to Manchester United’s new manager David Moyes, Mark Carney has become governor of the Bank of England with an in-tray overflowing.
A handsome chap, with looks regularly likened to those of George Clooney, Carney has certainly renewed interest in the Bank. Expect him to get a lot more exposure in the press and, if it doesn’t go well, any future critics will not forgive him for puncturing their high expectations.
But he is, of course, a credible governor, described not hyperbolically by George Osborne as “the outstanding central banker of his generation”. He is best known in Canada for acting quickly in response to the global economic downturn – by slashing interest rates and making monetary stimulus available. Canada was, in fact, the first G7 country to restore GDP and unemployment to pre-crisis levels.
On the other hand, some say his actions across the pond have created a housing market bubble in Canada, which he has walked away from in a very timely manner. Are there signs that he may create a superficially strong situation in Britain, take the plaudits and then hop on his bicycle? He has already stated he will not stay in office for the whole eight year term. Let’s wait and see what happens to the Canadian housing market in the next few years, and draw our own conclusions.
The charm he has to offer is self-evident and refreshing. Combined with a healthy track record, it provides a platform of respectability and approachability that could get people on-side quickly. This should buy him a reasonable honeymoon period.
Widespread reform is unlikely, however. But with the Bank of England’s low interest rate policy and QE programme not yet managing to return the UK to strong growth, nor put a lid on inflation, many are calling for change. The chances of QE being expanded are very slim indeed, given its contentious nature. And although Carney made it available in Canada, it remained unused. On the other hand, he must remember that something has gone right, as we are generally in a much better state than most of continental Europe.
We are unlikely to see anything drastic immediately. Canadians are notoriously “Swiss” with regards to caution, and the British economy is far more complex than the economy overseen by his former employer. He is obviously fairly dovish from his past, and there are early signs that he is prepared to suffer higher inflation in order to maintain low interest rates. And he has signalled his intention to promote growth sooner rather than later, to the relief of the chancellor.
And how has he performed so far? Not well. He shanked his first tee-shot of the round by taking the “sweaty” Central line to work. But presumably he is now well-acquainted with the whereabouts of the Bank of England’s closest shirt maker, having undoubtedly come back up to street level with a two-toned shirt. I suspect he will be teeing off with his driver in future.
William Nicholls is a dealer at Capital Spreads.
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