New Bank of England Governor Carney faces grilling from MPs

Incoming Bank of England Governor Mark Carney faces his first public grilling on British soil this week as rate-setters decide whether to pump more stimulus into the UK's flat-lining recovery.

Mr Carney, who succeeds Sir Mervyn King in July, will field questions from the Treasury Select Committee on the future of the Bank's 2 per cent inflation target and how to kick-start the UK economy during a three-hour hearing on Thursday.

But the Bank of Canada chief is also likely to have to fend off questions from politicians over the £874,000 package offered by the Chancellor to win his man, a deal which makes Carney the world's highest-paid central bank chief. It includes a £250,000 housing allowance, but Mr Carney's basic salary also dwarfs the £303,000 a year earned by Sir Mervyn.

Mr Carney ducked questions over the future of monetary policy at the World Economic Forum in Davos, after previously triggering a debate over whether the UK should adopt a growth target instead of the current inflation target.

Citigroup economist Michael Saunders said: "They will ask him whether we should change the inflation target, and that will be very interesting. He'll find it very difficult to fudge a committee of MPs."

Mr Carney's future colleagues on the Bank's monetary policy committee will vote on whether to pump more money into the economy through quantitative easing (QE).

Most economists expect rate-setters to hold fire as the Bank's Funding for Lending scheme frees up credit availability. However, the shock 0.3 per cent decline in output between October and December is likely to sharpen the debate over more QE.

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