Friday 23 August 2019

Carney BoE successor will need popular touch

On the way out: Mark Carney will step down as Governor of the Bank of England next year after a test period at the helm as Brexit looms
On the way out: Mark Carney will step down as Governor of the Bank of England next year after a test period at the helm as Brexit looms

Swaha Pattanaik

Britain is on the hunt for a top-notch economist, with the skills of a diplomat and the hide of a rhino.

The successor to Mark Carney, who steps down as Bank of England governor next year, will have to navigate the economic and political minefields of Brexit.

The calculator assigns the heaviest weight to central banking experience. Home-grown contenders who score well are Andrew Bailey, currently the boss of the Financial Conduct Authority, Bank of England chief economist Andy Haldane, and the central bank's deputy governors, Ben Broadbent and Jon Cunliffe. Former Deputy Governor Paul Tucker has buffed his credentials with a well-received book exploring the limits of central bank independence.

UK finance minister Philip Hammond has in the past said he would consider candidates from abroad.

Obvious ones include Agustin Carstens, the general manager of the Bank for International Settlements, and Chicago Booth business school professor Raghuram Rajan, whose previous jobs include Indian central bank governor and the International Monetary Fund's chief economist. And the Indian's experience of volatile emerging market currencies would come in handy if a rough Brexit were to trigger capital flight.

While a British passport may not be essential, the central bank's high profile means the governor will need a popular touch. An appreciation of British humour, may be a minimum requirement.

Bailey, Cunliffe, Haldane and Tucker have experience of macroprudential regulation, an important tool for an institution which must protect financial stability as well as control inflation. Haldane also gets top marks for communicating complex ideas lucidly without making gaffes. That's a skill which eluded Broadbent last year when he said Britain's economy was going through a "menopausal" phase. The ensuing furore damaged his chances of getting the top job, even though he was quick to apologise.

Minouche Shafik, a former deputy governor who is now director of the London School of Economics, would also feature on any headhunter's shortlist, especially one that was looking to improve the diversity of the slate.

The next governor also cannot be a Luddite. Even if the Bank of England is rightly wary of Bitcoin, an understanding of the possibilities and risks posed by financial technology will be an important part of the job.

Equally important are creativity and grit: there will be limited scope to cut rates during the next downturn and media abuse comes free with the job.

As the candidates jostle for contention, some may slide while new names add themselves to the list.

What Breakingviews' calculator cannot predict is whether the best candidate for this job will actually want it.

Reuters Breakingviews

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