New Bank of England Governor a Dove or a HawkMake Text Bigger
The appointment of Mark Carney as the new Bank of England Governor is the first time in the Bank’s 318 year history that a foreign citizen has taken the position, and the first time that the role had been advertised.
However lets cut to the chase, what Landlords and borrowers really want to know is Mark Carney a Dove (someone that believes in keeping interest rates low) or a Hawk (someone that is more concerned with long term inflation than low interest rates).
No one really knows yet as his appointment was a surprise, but the feeling is that he will be more concerned than Mr King about the long term problems of easy monetary policy. Britain has tried to stimulate the economy with one of the largest injections of Quantitative Easing compared to its GDP of any country. The fear would be that as this easing unravels in the future it could cause run away inflation if the economy were to improve swiftly enough. If you combine this with interest levels at record lows for the last 3 years and the apparent ineffectiveness of QE it is easy to see why people could assume that he will be more Hawkish in the future.
However I don’t think anyone including the Bank of England can see growth increasing by much more than 1% per year or any large demand lead inflationary pressures over the next 3 years so it is very unlikely we will see a call for interest rates to increase, but we may be far more cautious in using QE.
The new Governor will also only be one voice on the Monetary Policy committee and his biggest challenge is likely to be the stabalising of the British banking system and the possible separation of consumer banking from investment banking.
Mark Carney comes to the UK with a very impressive record as Canada is the only member of the G8 to return to pre-crisis levels of economic output under his control. He has a lot to achieve and you cannot take the same measures from Canada and expect them to work in the completely different UK environment, but it is encouraging to have someone who has proven to be successful at the helm.
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