Mark Carney’s arrival at the Bank of England this morning is as much of an event at Westminster as it is two miles away in the City; few appointments have created such a glow of political excitement or such a burden of expectation.
The political hype started from the day last November when George Osborne, the chancellor, named Mr Carney as the new Bank of England governor, calling him "the outstanding central banker of his generation".
In an almost unprecedented outbreak of political consensus, Labour’s Ed Balls agreed. By the time Mr Carney appeared before a rapt treasury select committee in February, his spell over Britain’s politicians was complete.
But Mr Carney knows this is where high political expectations that he can single-handedly provide a monetary jolt to Britain’s sluggish economy run into reality.
The scale of running a Bank of England charged with delivering monetary policy, banking supervision and financial stability leaves plenty of scope for error.
A Populus poll of MPs found that two-thirds wanted him to shift the bank’s focus away from inflation targets to growth, with 59 per cent of those surveyed saying they were “optimistic” he would make a positive impact on growth.
Andrew Tyrie, chairman of the Commons treasury committee, said Mr Carney would have to establish and underscore the independence from political interference of the new bodies coming under the Bank of England's aegis, including those covering financial stability and prudential regulation.
He also believes Mr Carney has recognised the need for a collegiate style.
“This is a huge job for one man. Some have argued the governorship represents systemic risk centred on one person – he is sensitive to this and has said he will work in a consensual way.”
Mr Osborne is conscious of the pressure on Mr Carney to make an immediate impact and has been relieved that economic clouds have lifted somewhat since his appointment – giving the new governor more space to work himself into the job.
Treasury officials point out that the economic mood has become "less urgent in terms of pessimism" as Britain enters what the chancellor claims is a recovery phase.
Immediate tools
That is just as well because Mr Carney may not have the immediate tools at hand to provide a monetary stimulus, even if that was his intention.
David Ruffley, a Tory member of the treasury committee, notes that Sir Mervyn King, the outgoing governor, has tried and failed to implement a further £25 billion of quantitative easing in recent months but has found himself in a 6:3 minority on the monetary policy committee (MPC).
Mr Ruffley says that one of the things that MPs expect of Mr Carney is that he will try to implement more quantitative easing. “If that’s the case he may be off to an awkward start if a majority of the MPC continue to vote against.”
The chancellor sees this clarity on future policy as particularly important as the recovery takes hold and markets start to fear an early rise in interest rates; market turbulence over the past few weeks has shown the potential dangers ahead.
“More clarity over the future path of interest rates could help keep financial markets more stable,” Mr Osborne said in a speech this month as he set out his hopes for “monetary activism” under Mr Carney.
Mr Carney's success in treading a line between keeping prices down – Labour is campaigning hard on "cost of living" issues – and interest rates on the floor will be a factor in the next general election campaign.
'Superhumans'
But the new Bank of England chief also has to contend with a governor's job now so big that as Mr Balls said, "only superhumans need apply".
For all the political hype that surrounded his appointment, even Mr Carney would struggle to meet that billing. – Financial Times Limited 2013
