Mark Carney’s key moments at the Bank of England
Mark Carney, who ends a seven-year term as Bank of England governor on Sunday, ranks as one of Britain’s more worldly central bank bosses. His immediate predecessors rose through the ranks at the bank’s Threadneedle Street offices.
Carney – who holds Canadian, British and Irish citizenship – was a polished technocrat with an international pedigree, described by the former chancellor George Osborne, who courted him for a year, as “the outstanding central banker of his generation”.
Carney, now 54, arrived on UK soil following a spectacular rise that included a five-and-a-half year stint as governor of Canada’s central bank and 13 years at the investment bank Goldman Sachs before that.
He hands back the reins to Andrew Bailey, a Bank of England lifer, who must wield the central bank’s considerable resources to counter the economic effects of the coronavirus.
Here we look back at five key moments in Carney’s BoE career:
When he took over from Mervyn King in 2013, Carney was determined to give businesses, consumers and financial markets a clear view of the bank’s interest rate policy. Specifically, he wanted to show how the bank’s base rate would move looking two years ahead. Already a popular concept in the US, forward guidance took over from the bank’s traditional assessment of what to do that month based on the available data.
At his first quarterly inflation report meeting in August 2013, he said a fall in unemployment from 7.8% to below 7% would trigger a rise in interest rates from their then all-time low of 0.5%.
But unemployment quickly tumbled below 7% without any discernible jump in wages – which would have pushed up inflation and triggered a rate rise. Carney, the outsider, had misread the flexibility of the UK labour market and how fragile workers felt after the financial crash.
A year later, the Labour MP Pat McFadden, a member of the Treasury select committee, accused Carney of behaving like an “unreliable boyfriend”. Carney was a man who promised much and delivered very little, he said. It was a cruel jibe that stuck. Carney has never backed down, however. He defended forward guidance at his last appearance before MPs earlier this month.
The outgoing governor has been a lightning rod in the Brexit debate. Accused by Brexiters of abandoning the political neutrality expected of him and backing the remain campaign, he was admonished in the spring of 2016 as a “Project Fear” figurehead because of his repeated warnings about the negative economic impact of leaving the EU.
The row continued after the referendum. He clashed with the rightwing European Research Group, and in 2017 was branded an “enemy of Brexit” by its leader, Jacob Rees-Mogg. After the Bank warned in November 2018 that a no-deal Brexit could trigger a recession worse than the 2008 financial crisis, Carney was blasted on the front page of the Telegraph for unleashing “Project Hysteria”.
In an intervention undermining Carney’s authority, Lord King urged MPs to pursue a no-deal Brexit, saying it would have little impact on the British economy in the long run.
Carney’s immediate reaction to the leave vote in June 2016 was feted by nervous investors.
Dubbed “the only adult in the room” at the time, he was the first to react when early economic indicators showed business confidence falling through the floor. He stepped in days after the vote on 30 June to say an interest rate cut was needed to steady the ship. Jittery financial markets rallied and stability was restored. The bank’s monetary policy committee duly delivered a rate cut a few weeks later.
While Carney did sound the alarm before the EU referendum about a recession that never ultimately materialised, his other warnings about the negative economic consequences have come to pass: the pound crashed, inflation spiked, economic growth slowed and the average household has been left worse off.
Carney’s drive to push the climate emergency up the world’s agenda stakes his claim for a lasting legacy. The governor first sounded the alarm over the risks to financial markets and the global economy in a speech in 2015, when he warned about the “tragedy of the horizon”.
In a landmark speech to the insurance market Lloyd’s of London, he said the world was running out of time to deal with global heating as the risks mounted from extreme weather events.
Carney sides with Greta Thunberg against Trump over climate
Before Carney, central banks had typically kept away from climate issues. However, the Bank’s governor used a letter to the Guardian in 2019 to warn that the financial system faces an existential threat, placing the issue squarely on the agenda for global central banks.
Stress tests on banks’ climate risks, proposed and developed on Carney’s watch, will take place next year under Bailey. Although he is leaving the Bank, Carney will advise Boris Johnson on climate-related financial risks for the Cop26 UN climate change conference in Glasgow later this year.
The biggest challenge for the world economy since the financial crisis hit just as the governor was preparing to leave. Carney used his final week in charge to launch an emergency interest rate cut – the first since the 2008 credit crunch – slashing borrowing costs in a coordinated move alongside Rishi Sunak’s first budget as chancellor.
Threadneedle Street cut interest rates from 0.75% to 0.25%, taking the key determinant of borrowing costs for households and businesses to the lowest level in the Bank’s 325-year history.
In a double-headed press conference alongside Bailey, he said the economic shock from the coronavirus would be large but ultimately temporary, as nations step up their response to the disease.
Stock markets around the world crashed the following day by the most since Black Monday in October 1987, amid widespread investor panic over the dwindling chances of a quick recovery in the global economy.
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