Carneyval Time at the Bank of England
As an International Finance Centre in the sterling area, Jersey has a keen interest in what goes on in the UK. The new team at the helm of the Bank of England (BOE) reports for work today with new Governor Mark Carney and Chief Operating Officer Charlotte Hogg.1 July 2013
Carney has become the poster child of central bankers, after a successful period in charge of the Bank of Canada. Charlotte Hogg built a sound reputation for minding the shop at Santander, a role Carney has recreated at the 'Old Lady'.
This looks like a smart early move as IT and Cyber crime are to the fore, and just the sheer scale of the BOE operations mean it is a complex beast to manage. Having a good No 2 should allow Carney to focus on strategy, policy and communications.
In the short term, communications will be the most important as market participants look for reassurance on any changes in policy direction.
Recent Bernanke inspired market turbulence will likely influence Carney’s first moves but in the medium term he will want to ring the changes. Early no regret moves could include signalling base rate will stay at the current level for a period of time or until a trigger event such as unemployment falling below 5% occurs.
There is little doubt Chancellor Osborne will be looking for as much help as he can get on the monetary policy side so we may see more influence being brought to bear around QE and bond buy back programmes reducing the servicing costs of government debt further.
It remains to be seen if the central policy plank of controlling inflation will give way to warding off deflation, currently the greater risk in the eyes of some commentators.
More innovative moves could include growth targets for employment or job creation, and greater intervention by way of funding support for the government led focus on mortgages and SME lending.
Above all Carney will want to start well, market stability is fundamentally about confidence, and all eyes will be on the new Governor in the first few days and weeks in office.
In the first instance, he will want to avoid any moves that stoke up market turbulence, but expectations are sky high after the eulogies of praise flowing from the announcement of his appointment.
Carney will likely be given a nickname early doors, let’s hope it isn't 'Carnage Carney', 'Commander Carney' or 'Carney the Confident' have a much better ring to them!