The head of Canada's central bank Mark Carney has been appointed as governor of the Bank of England, a move that surprised the City where many had expected Paul Tucker, one of the Bank's two deputy governors, to get the top job. Find out what economists and others made of the appointment.
Malcolm Barr, JPMorgan
We had thought Paul Tucker was a shoo-in, but we were wrong.
The fact that the Bank of Canada does not publish minutes or a voting record of its meetings makes it hard to place Carney as a dove or hawk relative to the views of others. Carney is generally seen as pragmatic and astute economist, rather than one with a predilection for one particular school of economic ideas. A recent speech on the merits of a flexible inflation targetting framework reads like one any member of the current UK MPC could have given.
On the regulatory side, Carney's role as chair of the Financial Stability Board suggests an individual cut from relatively orthodox cloth while working at the coal face of implementation on a range of issues. We suspect it is this sense of a combination of both monetary and regulatory attributes, plus a wish to refresh the leadership and culture at the BoE given its new responsibilities, that has led to Carney's appointment.
Under Carney's governorship the Bank of Canada has not had to make the journey deep into unconventional territory that the BoE has made, nor did it have to step into financial support for the banking system to the same extent. The Bank of Canada did move into the space of providing guidance on future rates as they hit their lows in 2009. But an Appendix to the Monetary policy report of April 2009 lays out a framework in which other balance sheet tools could have been used. We suspect that Mr Carney's arrival on the MPC may bring some new ideas to the table in the credit easing space, but we would be very cautious about expecting them to be at all radical.
Apparently Mr Carney is a fan of rock band AC/DC. Not too much of a journey from AVFC. We promise to work a reference to "Highway to Hell" into future emails ...
Vicky Redwood, chief UK economist, Capital Economics
Bank of Canada governor Mark Carney is well-qualified to manage the Bank of England's expanded role when he takes over from Mervyn King as governor of the Bank of England at the end of next June. Nonetheless, he faces new and big challenges ahead.
Most notably, Mr Carney has a wide range of experience in the economic and financial worlds – including a PhD in Economics, a period working at Goldman Sachs and his current role as chairman of the Financial Stability Board, a body co-ordinating international bank regulations. Note too that the Bank of Canada and the UK have similar monetary policy regimes. The Bank of Canada targets the midpoint of a 1% to 3% inflation range and undertakes similar quarterly forecasting exercises.
That said, Mr Carney does not have experience of regulation of the financial sector on a day-to-day basis, an important part of his new job.
Canada has not had the fiscal problems seen in many other major economies, so we do not know much about his attitude to fiscal tightening either. Of course, Canada is considered a textbook example of a successful fiscal tightening in the 1990s, but that was well before his watch (Mr Carney took over in 2008 and was supposed to serve a 7 year term until 2015).
Rob Carnell, UK economist, ING
Governor Mark Carney is regarded by some as one of the G7's more hawkish central bank governors. Under Carney, the BoC has embarked on some cutting edge policies, especially in connection with the clear and date-specific guidance of monetary policy, tactics which the US Federal Reserve has also adopted.
The appointment is something of a surprise, especially given that Carney denied being in the running for the job at various times in the succession process. As well as the market favourite, BoE deputy governor, Paul Tucker, he trumps others including Lord Adair Turner, Sir John Vickers, and the RBA's Glenn Stevens.
Most in the City of London had taken for granted that despite the Libor scandal which may have damaged him more than many thought at the time, Tucker was probably the most likely appointment. From our straw poll of colleagues and city contacts, Tucker was not a universal pick, but was felt to have fewer "bank hating" characteristics than some of the alternative choices. Though some others have suggested he was slow to pick up his financial stability brief in the early stages of the financial crisis.
In Carney's favour, Canada has emerged from the global financial crisis in better shape than any other G7 country, with lower public debt, and a stronger financial system. Whether this owes to great BoC foresight, or skilful policies is a moot point, but it leaves Carney's reputation looking good.
It is also worth pointing out that the BoC remains about the only G7 central bank with a tightening bias. One could argue that this marks Carney out as one of the most hawkish central bank governors in G7 space, though equally, this stance is more appropriate for Canada's own particular situation, and we may find that he is quite different as BoE Governor.
None of this will likely change the immediate policy decisions facing the Bank of England. The funding-for-lending scheme remains the major policy initiative right now, and its success or otherwise will likely determine whether the asset purchase scheme is dusted down once more, or passed over – especially as current BoE governor, Mervyn King has indicated that the policy may have lost its "va-va-voom" (our words, not his).
Deputy governor Charlie Bean, may in the handover period provide a degree of stability (he will stay on for an extra year after his original term ends on June 2013), and we suspect he may take a stronger role in the communication of Bank policy along with chief economist, Spencer Dale, whilst Carney finds his feet.
As for the Bank of Canada, the consensus view is that senior deputy governor, Tiff Macklem will step into the breach.
Andrew Tyrie, chairman of the Treasury select committee
Dr Carney is an experienced and talented appointee with deep public and private sector experience. The chancellor's statement has been welcomed on all sides of the House. I'm grateful that the chancellor has offered his support for the Treasury committee's long-standing view that we should hold what amounts to a pre-appointment hearing and should report our conclusions to the whole House. This is an important step forward.
Douglas McWilliams, chief executive, Centre for Economics and Business Research
The new governor of the Bank of England, Mark Carney, who has been revealed today, is one of the more impressive public servants in the Commonwealth. Most top civil servants today give the impression of being politically astute but not wise; if anything Carney's balance of strengths is the other way round.
Economic policy making will be different. Mervyn King – whatever his difficulties of managing his staff, the MPC and the immediate aftermath of Northern Rock – did understand the scale of the economic problems, even though some of his own economics staff have not done so. As a result, although the Bank's forecasting record has been nearly as bad as the OBR's, the MPC's policy decisions on QE and interest rates have been about right, despite the forecasts.
The task for Carney is to know when to overrule his underlings. He will get a better press if he can persuade them to agree with him, but it is more important for him to get it right.
On banking regulation he needs to focus more on getting boards to make the right decisions rather than on getting civil servants to second guess what bankers should do. My suggestion is that he looks to ensure that boards pay a personal premium price if they get it wrong rather than trying to micro manage.
Giorgio Questa, visiting professor in banking at Cass Business School
Appointing Carney as governor after hiring Martin Wheatley as CEO designate of the FCA is a very smart move by the chancellor.
Dr. Carney has a top CV and well-established international credibility. Furthermore, he was in no way involved in the unhappy period for UK banking that started with the collapse of Northern Rock.
guardian.co.uk © Guardian News and Media Limited 2010