James Bartholomew

Carney must go

The Bank of England governor’s ‘forward guidance’ is reliably wrong. His other interventions are even worse

Oh dear. Mark Carney is irritated. His proud independence has been challenged. The Prime Minister had the temerity to admit that she was not altogether thrilled with his ‘super-low’ interest rates and quantitative easing. These policies meant that people with assets got richer, she pointed out. ‘People without them suffered… People with savings have found themselves poorer.’ Mr Carney found this intolerable and haughtily rebuffed her, saying, ‘The policies are done by technocrats. We are not going to take instruction on our policies from the political side.’ Back in your box, Mrs May. Carney’s in charge!

As they clash, it is increasingly hard to remember what a bright day it was in November 2012 when George Osborne signed up Mr Carney to be the new governor of the Bank of England. Mr Carney was the very best — ‘the outstanding central banker of his generation’. Not for Britain some dusty old Bank of England jobsworth but a stylish, handsome, international banking pin-up. It was worth paying extra to persuade him to come over from Canada, said Mr Osborne.

Now he has been here for just over three years and it is fair to say that a problem has emerged that is even worse than his tiff with the Prime Minister. He keeps getting it wrong. Soon after his arrival in the summer of 2013, he implied he would think about raising interest rates when unemployment fell below 7 per cent. But he evidently did not understand what was happening in the labour market here as influenced by the reforms of Iain Duncan Smith. Unemployment fell quickly below this level. Did he raise interest rates? No. It would have been wrong. He had misfired. All he had achieved was to demonstrate that he didn’t understand a key part of the British economy.

Mr Carney then changed tack.

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