UK recovery hopes pinned on new governor Carney

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New Bank of England governor Mark Carney will become one of the most powerful central bankers in the world today when he takes the reins at a crucial time for the economy.

The Canadian arrives amid mounting expectation of a more activist stance towards monetary policy as the Bank looks to keep the UK recovery on track.

Hailed as the “outstanding central banker of his generation”, Mr Carney arrives from the Bank of Canada, where he is credited with helping the Canadian economy recover faster from the downturn than any other developed major nation.

He takes office amid mounting signs of recovery in the economy but recent official figures revealed how far the UK has to go before returning to its pre-crisis conditions.

Widespread revisions by the Office for National Statistics meant that the double dip recession at the end of 2011 and first half of 2012 was erased from history.

However, revised data revealed the initial recession following the financial crisis was far worse than first feared, which means the economy is now even further behind its pre-crisis level.

GDP is now 3.9 per cent lower than its peak in the first quarter of 2008 – previously it was estimated to be 2.6 per cent below.

One of Mr Carney’s first tasks will be to chair the Monetary Policy Committee’s monthly meeting as it gathers on Wednesday and Thursday to decide on interest rates.

While economists are not expecting any action in July, many believe the Bank will move to cement the recovery over the next few months.

Vicky Redwood, at consultancy Capital Economics, said: “Bold action by the new governor would help to cement any recovery, but he cannot afford to be timid.”

She added: “The recent pick-up in the economic news has begged the question of whether Mr Carney actually needs to do anything any more.

“But the recent modest improvement is still far from the “escape velocity” he has said he wants to achieve.”

More on Mr Carney’s plans for monetary policy are expected from August onwards, with the possibility of introducing specific forward guidance on the cards as well as a further cash injection into the economy.