Mark Carney has been taking the big decisions for Britain's economy for the past three years, but his next one will be much more personal.
Mark Carney has been taking the big decisions for Britain’s economy for the past three years, but his next one will be much more personal.
The Canadian has said he intends to say before the end of this year whether he will stick to his original plan to step down as Bank of England governor in less than two years’ time, or extend his stay until 2021.
Above all, he will have to decide whether he wants to stay for the task of steering Britain’s economy through what is likely to be a period of upheaval as it leaves the European Union and begins life outside the bloc.
Some think that is the kind of job that Carney – who was hailed by the man who hired him, former British finance minister George Osborne, as the “outstanding central banker of his generation” – would relish.
When his move from the Bank of Canada to the BoE was announced in 2012, Caney said he was “going to where the challenges are greatest” at a time when Britain was still suffering from the hangover of the global financial crisis.
Richard Barwell, a former BoE economist, said the even bigger challenge of Brexit would appeal to Carney’s sense of ambition. “He wants to be in the spotlight and on the world stage,” Barwell, who now works at BNP Paribas, said.
Even if he privately has doubts about staying, Carney might find it hard to leave London after five years, given the expected Brexit shock to the economy. “Walking away at time of crisis might not be seen as the done thing,” Barwell said.
When Carney agreed to come to London, he secured an agreement from Osborne that he would run the BoE between 2013 and 2018, with an option to serve out a full eight-year term if he wanted to take it up.
Carney, the father of four school-age children, said then that he had personal and professional reasons for staying for five years rather than eight.
He quickly began an overhaul of the 322 year-old BoE, making its monetary policy and bank supervision work more closely, addressing one of the key lessons of the financial crisis.
But in January, Carney left the door open to a longer term, saying he would decide by the end of this year whether he would seek to stay until 2021.
Commentators were quick to link the change in tone to the diminished prospects of a switch into politics for Carney in his native Canada, where Justin Trudeau had just been elected as the country’s new, young prime minister.
Under the terms of his appointment, Carney can choose to serve out the full eight years without the approval of Britain’s new finance minister Philip Hammond who, in any case, has said spoken highly of the BoE’s smooth response to the Brexit shock and said Carney was doing “an excellent job.”
Chris Philp, a Conservative lawmaker who sits on the Treasury Committee in parliament, which oversees the work of the BoE, said he wanted to see Carney stay until 2021.
“He has done a good job at the Bank since his appointment, and the relatively smooth passage – so far – post-Brexit vote is in part attributable to him. I would like to see him stay longer,” Philp said.
The lack of an obvious next move for Carney could be a factor that persuades him to stay longer in London.
In fact, one suitably big job – running the International Monetary Fund – is due to become available only in 2021, which would coincide with the end of a full eight-year term for Carney at the BoE.
However, some observers think that June’s Brexit vote has made it more likely that he will decide to leave the BoE in June 2018, as originally planned.
Before the referendum, Carney made it clear he thought leaving the EU would be bad for Britain’s economy, angering some Brexit campaigners, and last week he described the day after the “Leave” victory as his toughest.
Former finance minister Nigel Lawson kept up the attacks on Thursday, saying Carney’s involvement in the debate had been “disgraceful” and he should quit. But most of his critics have toned down their attacks since the vote.
With the economy now expected to slow sharply in the next few years because of the uncertainty caused by Britain’s planned departure from the EU, the BoE is facing the prospect of a potentially long exercise in damage control.
At the same time, the ability of the BoE to come up with a lot more stimulus for the economy looks limited.
Interest rates stand at nearly zero and Carney has repeatedly said he does not favour cutting them into negative territory although it does have the option of ramping up its 435 billion-pound bond-buying programme even further.
In another potential disappointment for Carney, Brexit will also diminish Britain’s influence over EU rule-making in the financial services industry, a subject close to his heart.
“Does he really want to preside over an additional three years of decline? Probably not,” an observer of Carney said.