With expectations high, is there any way new Bank of England governor Carney can deliver?


Mark Carney is a very good appointment as the new boss at the Old Lady. The big question is whether too much is being expected of him. This may be the case, given that the economy is flatlining. He certainly has a huge task: the economy has grown only 0.09 per cent a quarter over the last eleven quarters (excluding the 0.7 per cent growth down to the Olympics), and unemployment is stuck at 2.5m. What can he do to break the impasse? I would suggest following the recommendations of former Monetary Policy Committee (MPC) member Adam Posen – buying securitised bundles of small, medium and new enterprise debt to get business lending going. This way he can get around the votes of the gophers on the MPC, who don’t want to buy more gilts because of non-existent inflation fears even though there is no wage pressure. Some will worry that Carney has inherited a poison chalice. He needs all our good wishes. David Blanchflower is Bruce V Rauner professor of economics at Dartmouth College, and a former member of the Bank of England’s MPC.


Market expectations around the new Bank of England governor’s arrival are high. The consensus is that the Canadian will reveal a box of tricks to magically solve all of the UK’s financial issues. It is not, however, going to be that simple. The options available to him are limited. Carney faces the same Monetary Policy Committee as Sir Mervyn King. So if he believes more QE is necessary, he will have to provide a persuasive case for more stimulus – tough, as the outlook for the UK economy is beginning to look better. Historically, monetary policy decisions take around two years to have any effect on the real economy, so for those expecting speedy results, there will be disappointment. While the government proposes that economic growth is looking stronger, the road to recovery remains fitful and fragile. So Carney will likely suggest alternative measures in addition to QE. But how amenable will the Bank be to any radical moves he may suggest? Dean Cook is investment research analyst at Duncan Lawrie Private Bank.