Ex-White House Adviser Forbes to Join Bank of England Panel
Kristin Forbes, a professor at the Massachusetts Institute of Technology and a former White House adviser, will join the Bank of England’s Monetary Policy Committee, the latest hire in a shakeup of the panel.
Chancellor of the Exchequer George Osborne announced the appointment of the 43-year-old American today, and said she’ll participate in the rate-setting committee’s July 7 decision. She will replace Ben Broadbent, who has been named deputy governor for monetary policy.
Forbes previously worked to safeguard global financial stability with then-U.S. Treasury Undersecretary John Taylor and became the youngest member ever on the White House Council of Economic Advisers. She will be one of four part-time members of the MPC and joins the bank as officials assess the timing for the first interest-rate increase in more than six years.
“The last person Osborne will want is a huge hawk,” said Danny Blanchflower, who sat on the MPC from 2006 to 2009. “My advice to her is to take it all in for three months before you do anything. It’s a great appointment.”
Governor Mark Carney has implemented a management shakeup since he joined the BOE from the Bank of Canada last year, which included elevating Broadbent to a full-time policy role to replace Charlie Bean after he retires at the end of June. He also appointed the BOE’s first chief operating officer and hired Nemat Shafik from the International Monetary Fund to fill a newly created fourth deputy post.
Forbes beat 33 other applicants to succeed Broadbent, who along with Shafik will be the first women to sit on the panel since Kate Barker stepped down in 2010. In August, before their appointments, Carney said that the gender imbalance was “striking.”
Forbes declined to comment on her appointment when contacted by telephone today.
Her policy experience also includes work on the Argentine debt crisis in 2001. She was drafted into the role by Taylor, known for a monetary-policy rule named after him, when he was Treasury undersecretary for international affairs. She’s also on the academic advisory board of the Washington-based Peterson Institute for International Economics, led by former MPC member Adam Posen, and the panel of economic advisers for the Congressional Budget Office, according to her biography page on the MIT website.
“Most people who end up on the MPC are monetary policy experts, but she has broad experience also in fiscal issues, economic policy and policy around financial services,” said Pippa Malmgren, president and founder of Principalis Asset Management LLP in London and a former financial-market adviser to President George W. Bush. “She’ll be a great addition.”
She’s the latest to join the central bank policy making world from MIT, which lists former U.S. Federal Reserve Chairman Ben Bernanke and European Central Bank President Mario Draghi as alumni. Stanley Fischer, former Bank of Israel governor, has described the school as specializing in “economics about the real world.”
Forbes earned a PhD in economics at MIT and won tenure at the school early last decade after pushing ahead with research on financial contagion that some colleagues said would lead nowhere. She presented the opening paper at the Fed’s 2012 symposium in Jackson Hole, Wyoming.
Forbes’s appointment reflects the increasing desire for central banks to have staff with international insights as well as a willingness by governments to look across borders when hiring.
Fischer is preparing to join the Fed alongside Lael Brainard, the U.S. Treasury’s former undersecretary for international affairs. Reserve Bank of India Governor Raghuram Rajan previously ran the IMF’s economics department, while the ECB picked Canadian Julie Dickson to help oversee banks.
Forbes joins the 320-year-old BOE as officials weigh the timing of the first move to tighten policy since they cut borrowing costs to a record-low 0.5 percent in March 2009.
The strengthening U.K. economy may mean that the BOE considers a rate increase before the Fed. In making their decision, Blanchflower said British officials need to understand the outlook for other central banks to take action, and Forbes and Shafik will provide the panel’s “eyes outside the U.K.”
From that perspective, Forbes may be better off commuting to the MPC meetings from the U.S., as he did when he joined from Dartmouth College, he said. Posen, by contrast, left the Peterson Institute to move to the U.K. for his time on the MPC.
“It’s clearly going to be a big policy decision and having someone who understands what the U.S. economy is doing is hugely important,” Blanchflower said. “I think she gets that.”
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