Mark 'Capable' Carney gets off to an assured start

The big news is that Mr Carney didn’t actually say that much, but I am looking forward to watching the new broom start sweeping.

Share

It really was quite some performance. George Osborne’s flexible friend Mark “Capable” Carney sat on the hot seat for nearly four hours giving testimony before the Treasury Select Committee without flagging for a second, and barely made a slip. He clearly has the stamina for the job. I was exhausted just watching him. Mr Carney has a relaxed style and is much more affable than his predecessor. And he did what he set out to do, which was essentially to say nothing.

Committee members pushed him on his £874,000 recruitment package in light of the fact that Bank staff have had a pay freeze for the last two years. There is a market for talent in the financial sector, and Mr Carney has what economists call a high “opportunity wage” – that is, he could earn a large amount in his next best alternative employment, and probably a lot more if he was to go back to the private sector. So the fact of life is that the Government had to pay to get their man. We should always remember that 1 per cent of GDP is a really big number (£15bn actually, or around £40 per UK resident). End of discussion, unless of course Mr Carney fails to deliver, which I hope doesn’t happen for the country’s sake. Then all bets would be off. People would be able to say they haven’t had value for money, and the British media will turn on him, so the pressure is on and he knows it.

He has taken on a really tough job because, as the OECD made clear in its report on the UK released last week, the British economy is going nowhere. The chairman of the TSC, Andrew Tyrie, seemed pleased that he managed to get Mr Carney to agree to respond to the committee’s requests, which Sir Mervyn King had unreasonably blocked at every turn.

Some of the most interesting comments were about the new Governor’s consensual style of management, which will be a welcome breath of fresh air for the staff at the Bank of England. They will feel like they are about to have a giant foot taken off their collective heads. It is clear that Mr Carney is an experienced manager and will appoint his own people. He should do that sooner rather than later as there are a couple of hawkish members of the MPC, chief economist Spencer Dale and external member Martin Weale, whom he and his boss, Mr Osborne, may want to pink-slip. Both their terms expire in the spring and this is an opportunity for the new Governor to impose his will. Maybe he has a few Canadian central bankers and economists whom he would like to relocate from one of the least expensive capitals of the world, Ottawa, to one of the most expensive, London. I suspect he won’t have trouble getting them work permits.

We learned some interesting facts. Mr Carney is keen on bridge-building and praised a couple of bank staff, Andy Haldane and Paul Tucker. He also made it clear it was important to his decision to take the job that Charlie Bean had agreed to stay on for another year. So the Deputy Governor for Monetary Policy (Bean) was instrumental in the Deputy Governor for Financial Stability (Tucker) not getting the job. It will be interesting to be a fly on the wall at the next few MPC meetings. I suspect Mr Tucker is already looking for a well-paid private-sector job.

Mr Carney did make a dig at Lord Turner, the outgoing head of the FSA, whose job Mr Carney is also taking, and who had expressed an interest in distributing so-called “helicopter money”. The new Canadian boss said he couldn’t back this in a month of Thursdays. It will also be interesting to see where Lord Turner goes next; he is also likely to get big-money offers of employment in the Square Mile or its Canary Wharf annexe.

So the big deal was that Mr Carney didn’t actually say that much; he is an experienced central banker who knows not to rock the boat. The last thing he wanted was to cause big oscillations in the markets, and he largely succeeded in that. He did call for a short reappraisal of the Bank’s remit, and revealed that he had had “high-level” discussions with the Chancellor over such a possibility.

He told us that we now operated flexible inflation targeting, and he made it clear he is keen on forward guidance, that is to say keeping rates lower for longer. A change in the remit is something that is for Mr Osborne to decide, and he likely will announce first steps in the Budget. In the end, I would not be surprised if he moved rather closer to a dual mandate, with more emphasis on growth, given his problems loosening fiscally. It would be appropriate for such a change to be in place by July, when Mr Carney takes office. We need to get away from the focus on non-existent inflation.

Interestingly, the MPC released its decision at noon, in the midst of his grilling. The nine members would have been aware of the happenings a couple of miles along the Thames, and would have been mindful not to rock his boat. They kept rates and the amount of QE unchanged, but did issue a statement, which normally happens only when there has been a change in rates or the scale of asset purchases.

This time my guess is that it was done because they voted for the first time on reinvesting £6.6bn gilts that are to mature before their next meeting. We won’t know what is actually being purchased for a month. Plus there was a hint that the CPI forecast in its Inflation Report next week was going to be higher, and the statement was meant to clarify they had no intention of tightening. There is a possibility that one of these votes wasn’t unanimous, and we won’t find that out for a couple of weeks until the minutes are released. Money available from maturing assets could be used by the MPC to buy private-sector assets without increasing the level of QE.

There are interesting days ahead in Threadneedle Street. I am looking forward to watching the new broom start sweeping.

Apparently, the members of the committee seemed pretty pleased with his performance, as they all rushed over at the end of the marathon hearing to shake his hand. They don’t  have the right of veto, but will surely issue a report, which is bound to be glowing. It’s a good time to be a central bank watcher.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Ashdown Group: Finance Manager - Covent Garden, central London - £45k - £55k

£45000 - £55000 per annum + 30 days holiday: Ashdown Group: Finance Manager - ...

Ashdown Group: Systems Administrator - Lancashire - £30,000

£28000 - £30000 per annum: Ashdown Group: 3rd Line Support Engineer / Network ...

Recruitment Genius: Graduate Web Developer

£26000 - £33000 per annum: Recruitment Genius: A Web Developer is required to ...

Ashdown Group: PeopleSoft Developer - London - £45k

£45000 per annum: Ashdown Group: PeopleSoft Application Support & Development ...

Day In a Page

Read Next
 

Isis in Iraq: Even if Iraqi troops take back Saddam’s city of Tikrit they will face bombs and booby traps

Patrick Cockburn
The Royal Mint Engraver Jody Clark with his new coinage portrait, alongside the four previous incarnations  

Queen's new coin portrait: Second-rate sculpture makes her look characterless

Michael Glover
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003