Next Bank governor should not come from overseas, warns former rate-setter
Ex-MPC member Andrew Sentance wants the next Governor to be more ‘familiar’ with the UK economy.
Bank of England Governor Mark Carney has been savaged by a former interest rate-setter, who has accused the Canadian of “lacking confidence” and called for him to be replaced by a Brit.
Andrew Sentance – senior economic adviser at PwC and a former member of the Bank’s Monetary Policy Committee (MPC) – told the Press Association the Treasury should not look overseas again as it begins compiling a short-list of candidates to replace Mr Carney at the helm.
In an explosive critique of Mr Carney’s reign, Mr Sentance said the Governor’s “lack of confidence with raising interest rates has been due to the fact he’s not familiar with the UK economy”.
He added: “I don’t think we should appoint somebody else from overseas.
“I don’t think having people who aren’t familiar with the UK economy jetted in would be a good thing.”
Mr Carney’s term ends in June next year and the Treasury is expected to draw up the shortlist of potential successors this summer, with a decision set to be made around November.
The Canadian’s appointment in June 2013 saw him become the first foreign Governor at the Old Lady of Threadneedle Street, replacing Sir Mervyn King at the helm.
A Treasury source said the recruitment process for Mr Carney’s successor will be “open and fair”, adding that it will appoint the next Governor “purely on merit”.
Mr Sentance said Mr Carney’s tenure has been marred by a raft of missed opportunities to increase rates above 0.5%, having languished at emergency lows for more than 10 years.
His comments come after the Bank backed away from raising rates once again last month following a sharp slowdown in growth.
Mr Sentance said Mr Carney seems “very reluctant” to bring rates back to more normal levels, with just one rise last November, reversing a cut to 0.25% after the Brexit vote.
He said the MPC have “missed several chances” to raise rates since the start of 2014 and now risks leaving the economy facing a “stagflation scenario”.
“We’re in danger of being in a position where high inflation and low growth are feeding off each other,” he cautioned.
He also claimed Mr Carney’s attempts at so-called forward guidance on rates have back-fired, with the Governor earning himself the nickname of the “unreliable boyfriend” after bracing borrowers and financial markets for hikes that do not come to pass.
“His communication with the markets has been very poor,” said Mr Sentence.
He is backing internal favourite Andrew Bailey – head of the Financial Conduct Authority and former right-hand man of Sir Mervyn – to be the next Governor.
Mr Sentance said he would “like to see a woman heading the Bank”, but admitted the lack of strong internal candidates being brought through the ranks made it unlikely in the short-term.
Throwing his own hat into the ring, he said he would “be delighted” if someone put him forward as a candidate.
“I think I could do a very good job, but don’t think I’m flavour of the month,” he said.