Saturday, 29 June 2013

King out, Carney in

The Governor of the Bank of England, Mervyn King, finishes up his second, and final, 5 year term this week, and was really the only BoE Governor I've known.  While there was nothing really for me to dislike about him, he did seem to have an easy run before an unprecedented tough period in which he failed to take action and blamed his lack of power.
He eventually gained more power- too late to stop a lending squeeze which brought down Northern Rock- and introduced a quarterly Inflation report.  That was useful; if you wanted to highlight how poorly you were doing your job.  My understanding of the BoE's mandate is to keep Interest Rates steady, growth sustainable, and Inflation below 2%.  I don't remember seeing inflation below 2% in the whole time I lived in the UK.

In true British tradition there were some cool quirks that he who leads the 400 year old bank must abide by. Dealing with a twat with a red briefcase is one of them.  Another is writing a letter to that a fore-mentioned twat explaining why Inflation is over 2%.  That letter must have been written so often during Mervyn King's reign that it would have been smart to set up an email template.

Last week Mervyn mentioned that one of his regrets was not being vocal enough about the growing risks in the financial system in the lead up to the lending crisis in 2008.  Hindsight is wonderful.  With a change of powers, the BoE is now the authority when it comes to bank oversight and financial stability.  So his successor, Mark Carney should have no trouble when the next unprecedented financial shock rolls in.