Sterling Set To Slide: BOE Declines To Dismiss Speculation Carney May Announce Decision To Leave
As noted here yesterday, citing reports in British newspapers such as The Times and Mail Online, Mark Carney’s “self-imposed deadline” for declaring whether he will stay in office beyond 2018 is fast approaching, and the central banker may decide to step down as soon as next week. Reportedly, the 51-year old Canadian may announce his decision “within days” at his next scheduled public appearance on Thursday, when the BOE announces its policy decision and the governor holds a press conference in London.
Today, the FT followed up with a report that suggests Carney’s tenure at the BOE may indeed be coming to an end, when it reported that “the BoE declined on Sunday to dismiss speculation that the governor might announce his decision this week alongside the quarterly inflation report.”
The FT’s Chris Giles prefaced this by saying that “ardent supporters of Britain’s vote to leave the EU believe they are on the verge of another victory by forcing Mark Carney to resign as governor of the Bank of England before the end of his term in 2018.”
The impact on sterling will likely be rather adverse when it opens for trading:
With the governor seen by financial markets as a steady hand on economic policy in contrast with much more volatile government communication of its economic plans, sterling would again be vulnerable were he to announce his departure.
The fate of Carney may be linked to recent speculation whether the BOE has become too political, or is even independent: “Brexiters, who feel Mr Carney was always too supportive of Britain remaining in the EU, scent blood in their feud with the governor. Daniel Hannan, a Conservative MEP, said: “I am sorry to say this — he seems a nice enough fellow — but Mark Carney should indeed resign. He politicised his office inexcusably.””
The post-Brexit political regime has been on the fence about the fate of the BOE governor: Lord Lawson, the former chancellor, and Jacob Rees-Mogg and Bernard Jenkin, prominent Conservative MPs have also called for the governor’s head in recent weeks, saying that he was too doom-laden on the post-Brexit economy and had been too political in office.
On the other hand, Carney has received strong support from the chancellor, who has urged him to stay until 2021, and from allies of Theresa May in 10 Downing Street. “They have believed until recently that the governor would stay until 2021. The governor has played his cards close to his chest, stressing
repeatedly that he would fulfil the commitment he made on appointment in
2013 to serve until 2018 and adding that the decision of whether to
serve a full term until 2021 was personal.”
In evidence to the House of Lords last week, he dismissed suggestions that the prime minister was putting the BoE under pressure to change monetary policy or the personnel at the top of the central bank.
“To be clear, it’s an entirely personal decision and no one should read anything into that decision in terms of government policy. It is a privilege for me to have this role,” he said. “Like everyone, I have personal circumstances that I have to manage. This role demands total attention and I intend to give it as long as I can.”
As the FT concludes, “Financial markets interpreted the governor’s words as an indication he would stay on, while Brexiters thought he was hinting he would leave.”
However, today’s report may tip the scales to the former. Keep an eye on GBP for further indications of whether the market is becoming convinced that Carney is on his way out, in the process further weakening the UK currency.