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What can we expect from Mark Carney?

1 July 2013

5:36 PM

1 July 2013

5:36 PM

What the Mark Carney era may offer is a little bit more predictability on monetary policy. Under Mervyn King the main guidance came from the Bank’s quarterly Inflation Report press conferences, MPC minutes, and speeches by committee members. Under the Bank’s new remit, set by the Chancellor in the March budget, it’s likely that Carney, like Bernanke, will seek to link interest rates and monetary policy directly to growth and jobs targets

There will be subtle changes but no one, as economists at HSBC have noted, is expecting ‘shock and awe’. The big question for Carney is which indicators to use as targets. The runners are unemployment (as in the US), real GDP, or the measure preferred by many economists: nominal GDP. If that were to be the agreed measure, a current compendium of headline inflation and growth figures might suggest that we were in boom conditions. That would imply taking the famed ‘punch bowl’ away.


In Canadian conditions, Mark Carney was among the first central bankers to cut interest rates to the bone as the subprime crisis hit. As Matthew Lynn wrote here recently, the long period of low interest rates may have produced a Canadian housing and construction bubble, giving rise to fears of a ‘hard landing’ as monetary conditions have been tightened.

When George Osborne recruited Carney, it was assumed that the reason for doing so was to freshen up the Bank but also put some fire under monetary policy. But with the economy starting to recovery and a nascent housing boom on the back of ‘Funding for Lending’ and ‘Help to Buy’ schemes, Carney may feel his tasks are to guide the market towards an end to QE and a normalisation of the official bank rate, which has been held at 0.5 per cent for four years.

This is an extract from Alex Brummer’s feature on Mark Carney in this week’s Spectator. Click here to subscribe.

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Show comments
  • Tom Tom

    Carney must have his own PR Team to boost his ego. Canada is a basket case as Ontario makes clear and the property bubble must burst soon. The cost of living in Canada is horrendous. He is a typical Goldman flake and will leave a trail of devastation when he jumps from the Bank of England to lead the Liberal Party in Canada when Paul Desmerais summons him to do so

  • Abhay

    ”There will be subtle changes but no one, as economists at HSBC have noted, is expecting ‘shock and awe’. ”

    OK, we know what that means – more of the same.

  • Baron

    Alex, a central bank of any country has but one duty – to ensure price stability. One can only hope the new man sticks to this, the departing one didn’t, allowed house prices to rocket, the country’s still paying for it.

    If, as you hint, Carney links monetary policy to growth, jobs w’re truly and irrevocably fugged.

  • the viceroy’s gin

    Debt and stagflation. Duh.

  • Dogsnob

    The same bullshit and a massive bill.