New faces may help Carney on rates policy

Governor of the Bank of England Mark Carney
Governor of the Bank of England Mark Carney
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A shake-up of Britain’s top monetary policymakers, which started this week, caps a year of change at the Bank of England under Governor Mark Carney and might help him withstand growing pressure to raise interest rates.

Adding to a host of new faces already at the Bank, three of the nine seats on its interest rate-setting committee are due to change hands between June and August, beginning with BoE banking expert Andy Haldane. He attended his first rate-setting meeting yesterday after starting this week as BoE chief economist.

Like Haldane, the two other new policymakers – US academic Kristin Forbes and Nemat Shafik, a top International Monetary Fund official – fit well with Carney’s broader focus on the influence of finance on the economy.

But as ‘outsiders’, Forbes and Shafik have not followed Britain closely.

This has raised questions about how likely they may be to challenge Carney – at least initially – on the need to keep interest rates at rock bottom as the country’s economy recovers strongly.

“They probably aren’t as well versed in the intricacies of monetary policy or the situation in the UK,” said Peter Dixon, an economist with Commerzbank in London.

“Consequently, they are going to take a bit of time to find their feet.

“That might just be sufficient to allow Mr Carney, should he wish to do, to prevail in his view that rates don’t need to rise any time soon.”

A senior, London-based executive with an investment firm said all three of the new arrivals, plus recently appointed BoE deputy governor Jon Cunliffe – who is an expert in international banking – were unlikely to rock the boat on interest rates.