Next BOE Head Mustn’t Be Seen as Deliverer of Brexit, Niesr Says
Next BOE Head Mustn’t Be Seen as Deliverer of Brexit, Niesr Says
(Bloomberg) --
The next Bank of England governor shouldn’t be appointed to deliver Brexit, and they must have an intimate knowledge of the U.K. and its institutions, according to the director of the National Institute of Economic and Social Research
The next head of Britain’s central bank must “ensure monetary and financial stability, subject to whatever constraints any government may place on him or her” and must look “far beyond any cliff edge,” Niesr Director Jagjit Chadha said in a blog post.
Prime Minister Boris Johnson has pledged to take Britain out of the European union on Oct. 31 “do or die,” and BOE watchers have speculated over whether his administration will appoint a governor in line with his views on the best way forward.
Chadha, who previously worked at the BOE, suggested that bringing someone in from overseas, or even from outside the bank, might not be the best choice.
“The new governor will not have the luxury of easing into with a two to three-year period of getting to know the country, its institutions and regions. Secondly, the governor will need to have deep and broad experience of all the areas in which the bank now operates rather than being only (…ahem) an economic analyst.”
Current governor Mark Carney, who steps down at the end of January, is a Canadian national who previously headed that country’s central bank. He has been roundly criticized by Brexit supporters for his economic analysis of the decision to leave the European Union, and the risks of departing without a transition agreement.
The U.K. Treasury has been conducting interviews for Carney’s successor, with a decision expected in the autumn. About 30 people applied under a recruitment process managed by Philip Hammond, the Chancellor of the Exchequer at the time, who compiled a shortlist with the help of a headhunting firm. Hammond, who opposes a no-deal Brexit, was replaced by Sajid Javid after leave-supporting Johnson became prime minister.
Potential candidates include BOE insiders such as Andrew Bailey, the head of the Financial Conduct Authority, and Deputy Governor Ben Broadbent. Outsiders considered to be in the running include Gerard Lyons, an economist who backs Brexit and was previously chief economic adviser to Johnson when he was mayor of London.
Chadha said that the next BOE chief must recognize that unconventional tools such as quantitative easing have had an affect on wealth inequality, leading to questions over what the bank’s fundamental policy objectives should be. And he said Brexit will lead to yet more challenges ahead.
“The next governor must understand the particular set of economic and social circumstances that have led the country to seek an exit from the EU,” he said. “He or she must act as a governor for the whole country, not just for the City of London, because the shock of exit and that arising from the process of economic reorientation will not be felt uniformly and might indeed heighten regional inequalities.”
To contact the reporter on this story: Eddie Spence in London at espence11@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Paul Gordon, David Goodman
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