As the next interest rate decision approaches: Why the UK needs Bank of England governor Mark Carney to stay in place for Brexit
Next Thursday, all eyes will be on the Bank of England's monetary policy committee meeting and quarterly inflation report, when growth forecasts are revised.
Always closely watched, this time it really is a SuperThursday. November had been pencilled in for a potential rate cut, and BoE governor Mark Carney is under intense scrutiny from two of the biggest bugbears for any central banker: political pressure and an impending rise in inflation.
Many supporters of the UK's exit from the EU strongly objected to Carney's warnings of the economic risks of Brexit in the run-up to the referendum. Earlier this month, Prime Minister Theresa May upped the pressure, saying low interest rates and quantitative easing (QE) had "bad side effects" for savers, even if many consider them to be necessary economic medicine at times of financial crisis. May's comments were interpreted as a sharp criticism of BoE action in the aftermath of the referendum.
Former foreign secretary William Hague has gone even further, accusing central banks collectively of having “lost the plot”. He cautioned that, unless central bankers “stop sowing discord by inflating a bubble with make-believe money”, they will find their independence challenged.
Carney will probably try to steer the focus away from politics and back to his home turf next week by acknowledging that the economy appears to be slowing less than originally feared. A further cut in rates on 3 November, signalled by the Bank as recently as September, now looks much less likely.
In addition, the pound's plunge against the dollar has been more dramatic than the Bank expected, meaning inflation forecasts will be revised upwards.
Added to the mix is uncertainty about Carney's own future. He is due to announce by the end of the year if he will take up an option to stay an extra three years at Threadneedle Street or stick to his earlier plans and leave in mid-2018.
Carney should stay. His presence at the Bank may be infuriating die-hard Brexiteers but he represents continuity and stability at a time of profound policy upheaval. The country can ill afford to lose its central banker at such a time. Chancellor Philip Hammond has signalled his support for Carney and May should follow suit by allowing him to continue to operate with full independence. Rumours of Carney's plans for a future in politics won't go away, but for now – we need him to stay put.