Breaking the Bank

The exchange of letters this week between Mark Carney and Philip Hammond made it very clear who the supplicant was. The Governor of the Bank of England informed the Chancellor of the Exchequer that he was prepared to extend his term by one year. Carney pointed out that while the personal circumstances that had made him want to limit his term to five years had not changed, this country’s circumstances had. So he would be here a little longer.

Things had seemed very different a few weeks ago, when Theresa May bemoaned the consequences of the Bank’s monetary policy in her party conference speech. ‘A change has got to come,’ she had warned. ‘And we are going to deliver it.’ The Prime Minister’s willingness to criticise the effects of the Bank’s monetary policy was seen by many as threatening its independence. Carney himself was unhappy about it, and made that clear. Former chancellors and backbench Brexiteers having a pop were unlikely to bother him, but if the Prime Minister was expressing doubts about the Bank’s approach, that was serious. If Theresa May didn’t have complete confidence in Carney, his position would be untenable.

Shortly after May’s speech, in which she blamed low interest rates for high asset prices and worsening inequality, Carney told an old friend that he was considering heading back to Canada at the first decent opportunity, 2018. He wasn’t inclined to extend his term as Governor, despite a request for him to do so. It wasn’t just May’s criticism of monetary policy that had irked him. Those who know him say he hadn’t liked the whole ‘citizen of the world, citizen of nowhere’ tone of her speech — perhaps unsurprisingly, given that he is a Harvard-educated Canadian serving as Governor of the Bank of England.

Carney’s mood had not improved when his request for a meeting with the Prime Minister was initially answered with a date several weeks hence.