Gavyn Davies is top contender for new role in monetary policy

The Chancellor's dramatic move marks the end of the 'Ken and Eddie Show' but will bring new faces into the limelight

Gavyn Davies, chief economist at Goldman Sachs, has emerged as the leading contender for a newly created position of joint deputy governor of the Bank of England. The appointment would give him a leading role in setting monetary policy following yesterday's dramatic decision by Gordon Brown to hand responsibility for shifts in interest rates over to the Bank.

Such an appointment would also put Mr Davies in pole position for the governorship when Eddie George's tenure ends next May. He is one of the most respected of City economists - as well as being an Independent columnist - and his wife, Sue Nye, is Gordon Brown's assistant.

The Chancellor's unexpected move, which gave effective independence to the Bank 51 years after it was nationalised by Clement Attlee's landslide Labour administration, marked a dramatic shift in the new Chancellor's attitude to an independent Bank that was greeted with unconditional approval by financial markets. Bond and equity traders now expect inflation and interest rates to stay low and the pound to weaken from its recent strength.

The move, which was dubbed the most far-reaching in the Bank's 300-year history, drew the final curtain on the "Ken and Eddie Show", as the monthly meetings between the former Chancellor Ken Clarke and the Bank's governor Eddie George were affectionately known, bringing to an end the increasingly personalised encounters that had characterised the setting of monetary policy.

The expected appointment of Gavyn Davies to the deputy governorship is part of the creation of a monetary policy committee which will comprise the governor, his two deputies and six other members. Four of the committee will be government appointments who are recognised experts in monetary policy.

Academia is well represented in the list of those being tipped for the remaining slots on the committee, with the odds shortening on David Currie, a London Business School professor and working Labour peer, Charles Goodhart, a former Bank of England adviser who is currently a professor at the London School of Economics, Richard Portes, from the London Business School, and John Flemming, another ex-Bank man from Nuffield College, Oxford.

Runners and riders from the City include Tim Congdon, a Treasury wise person and hard-line monetarist and Paul Mortimer-Lee, chief economist at Paribas.

It is thought an industrialist is likely to feature on the committee, with Sir David Simon of BP a possibility.

The committee will meet once a month to decide whether interest rates need to be changed, using a government-set inflation rate target (currently 2.5 per cent) as a benchmark. Any changes will be announced immediately, with the minutes of the meetings released within six weeks of the meeting.

The removal of interest rate decisions from the Chancellor marks a dramatic shift towards a fully independent central bank.

The new regime is understood to have been modelled on New Zealand's, where the central bank is also charged with meeting a government-set inflation rate target. In Europe, the French and German central banks are given a more genuinely independent remit of achieving "price stability", which they determine.

The proposed changes end the Chancellor's monthly meetings with the governor of the Bank. Norman Lamont established that formal ritual back in October 1992 in the wake of sterling's crash out of the ERM when a commitment arose to keep to a strict inflation target which the Bank would have a part in setting.

It was Mr Clarke's innovation in 1994, soon after his appointment, which saw minutes published six weeks after each meeting, bringing interest rate policy out into the open. The meetings were peppered with sharp disagreements between the Mr Clarke and the Governor.

Teeth should be brushed twice a day to prevent tooth decay
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
footballChelsea 6 Maribor 0: Blues warm up for Premier League showdown with stroll in Champions League - but Mourinho is short of strikers
Those who were encouraged to walk in a happy manner remembered less negative words
Arts and Entertainment
Princess Olga in 'You Can't Get the Staff'
tvReview: The anachronistic aristocrats, it seemed, were just happy to have some attention
Renee Zellweger as Bridget Jones
ebooksAn unforgettable anthology of contemporary reportage
Life and Style

Board creates magnetic field to achieve lift

There have been various incidents of social media users inadvertently flouting the law

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Senior Helpdesk Analyst / Service Desk Co-ordinator

£27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London