Mark Carney says his role when he takes over the Bank of England this year will be to help with its “re-founding” and to encourage broader talks on improving Europe’s economic performance.
“The value of me going there to the institution is to bring a different perspective,” Carney said in an interview shown yesterday on Canada’s CTV News. “To be a bit of an outsider, to help with the reform, the re-founding, of the Bank of England, to think with the colleagues at the Bank and more broadly in the U.K. and Europe about policy options to really get those economies going and fix those financial systems.”
Carney leaves his job as Bank of Canada Governor June 1 to start work in London a month later, after being named in November as the surprise choice to lead the institution that was created in 1694. He will keep his other job as chairman of the Financial Stability Board, the Basel, Switzerland-based body that’s writing rules to avoid another global financial crisis.
Asked about the high expectations that come with his selection to the U.K. central bank, Carney said he will get “the full power of that institution focused on the right things, focused on price stability, focused on growth, repairing the financial system and helping to reform the global system and European system.”
Since his appointment was announced, Carney has signaled support for allowing the Bank of England more flexibility in meeting its 2 percent inflation target and greater forward policy guidance. He has also discussed the merits of targeting a level of nominal gross domestic product.
Policy maker Martin Weale said two days ago that it would be a “bad idea” to replace the inflation-targeting framework with one that focused on nominal GDP as that may boost inflation and be hampered by measurement difficulties.
The Times newspaper reported today that the U.K. Treasury has set up a group to explore changes to the BOE’s remit. A Treasury spokesman confirmed the existence of the unit, but said its creation didn’t necessarily mean a commitment to a change, according to the newspaper.
The Bank of England said Feb. 13 that inflation will remain above its goal for the next two years and risks to the economic recovery are weighted to the downside. The central bank’s Inflation Report said the outlook for consumer-price growth is higher than forecast in November because of the weaker pound and increases in energy bills.
Carney told CTV major central banks still have room to add stimulus and should ensure that new measures are consistent with their mandates. He spoke in an interview in Ottawa recorded before this past weekend’s meeting of policy makers from the Group of 20 nations in Moscow.
“There is a lot more they can do, but that doesn’t mean they should do it,” Carney said when asked if monetary policy is “impotent.”
“What is essential in all this is that monetary policy is anchored in an objective that’s given to the central bank,” Carney said, citing Canada’s 2 percent inflation target as an example. “That should hold for the other major central banks around the world.”
Group of 20 finance chiefs over the weekend sharpened their stance against governments trying to influence exchange rates as they sought to tame speculation of a global currency war without singling out Japan for criticism. Carney told Canadian lawmakers last week there has been “some concern” that Japan’s move to set a 2 percent inflation goal will affect its exchange rate.
Canada’s monetary policy remains “accommodative” because it will help reduce “slack” in the labor market, Carney told CTV. The benchmark overnight interest rate has remained 1 percent since September 2010 in the longest pause since the 1950s, while the national jobless rate was 7 percent in January.
Carney, 47, also told CTV he doesn’t expect his own country to go through a crash triggered by record household debts after he leaves, and reiterated he plans to return to Canada when his five years at the Bank of England are done. He said he was surprised by the chance for the new job.
“There’s no way at any point up until very recently, even a year ago, that I thought well I’m on a path to become, for example, the Governor of the Bank of England,” Carney said in the interview.
One thing Carney may bring with him from Canada is the idea of plastic currency.
Asked if there will be polymer pound notes, he said, “The Bank of England is exploring a variety of options for their next currency, yes.”
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