a while Ago, a columnist for the british compared to the future governor of the Bank of England, Andrew Bailey, with the long and loud process of mating of the turtle. At the Christmas party of the bank, a year ago, the outgoing governor, Mark Carney, was paraphrasing the columnist and defined humorously to Bailey as “the great turtle sexy”.
The sexual attractiveness of the new governor is debatable, but it seems clear that his career and style have many parallels with the attributes associated with these reptiles. Since 1985 he began to work at the bank, Bailey began a long and tortuous way towards the dome, his ability to work in team has earned the applause generic of his subordinates, and has had the ability to avoid the cliff by which he could have been despeñado during your moot and passive management to the front of the Authority of Financial Misconduct. On the 15th of march, will replace Carney as governor and will do so in an environment of great political stability in comparison with the recent past: at least has the advantage of dealing with a Government, the conservative Boris Johnson, who enjoys a huge parliamentary majority.
But the road is not without dangers. Since the Brexit to the setting of the british financial industry with almost exsocios community, the possibility of a recession in a time of limited room for manoeuvre on monetary policy, the need or not to better communicate the intentions of the bank in terms of types or the impact of climate change on businesses and investors.
The problem more imminent is the Brexit, that will be a reality on February 1 and its focus to the negotiation of a trade agreement with the EU and to resolve the future relationship of the United Kingdom and the United states in many other planes, including the status that will be the financial industry. When January 1, 2021 is the end of the transitional period, the City will lose the so-called “passport” that now allows him to act in the territory of the community with the same rights and obligations as their european peers. Everything indicates that we will pass on to the so-called system of equivalence, by which financial firms uk will be able to continue to operate in the territory of the European Union (and vice versa) when given few common principles of governance, mechanisms of cooperation as the supervisory and policy dialogue.
With that system, the European Commission will have the frying pan by the handle because, according to Jonathan Portes, professor of Economics and Public Policy, King's College London, “it is the EU that a decision of non-equivalence, and that is a unilateral decision that can then be altered or cancelled at any time”. “We are going to require equivalence when we believe that there is evidence that we are equivalent, and the European Commission will decide from that information if it goes ahead or if it imposes any condition”. The Bank of England has an important role because their task will be to try to prove in Brussels which sectors and subsectors of the british financial industry are in a position to be considered as equivalent with the EU rules.
There is a territory in which Bailey may end up facing storms of draft: though they have decreased the fears of a global recession, the tensions now with Iran, and in the future who knows what may end up bringing that recession. And the Bank of England, like the ECB, has a margin of manoeuvre is limited in the current scenario of interest rates to rock-bottom. The own Carney just acknowledged in an interview with the Financial Times: “it Is true in general that central banks have much less ammunition than they had before, and that situation will remain so for some time”.
Jonathan Portes is of those who believe that the underlying problem is the current mandate of the bank. “Already 10 years ago of the financial crisis and we have a regime of inflation target designed for an era in which we had a growth of 2%, an inflation rate of 2% and interest rates of 4% or 5%. And we now have interest rates close to 0% in almost all the developed world. In that scenario, it is very difficult to justify the regime of inflation target of 2% or inflation stable and operates in the ECB, the Bank of England, the Federal Reserve and in most other countries,” he says. His reflections are in line with those released last week by Lawrence Summers, former Treasury secretary of the united STATES. “The central banks are recognizing that, given the low inflation and low interest rates, the lower bound on interest rates is a severe restriction for the monetary policy”.
“We would like that Bailey changed the inflation target and replace with an objective linked to the nominal GDP”, writes Julia Behan, associate researcher of the liberal Adam Smith Institute. “We also want to move toward a system of free banking without deposit insurance and no bank rescue. That is to say, more competition in the banking sector. Also, although that is unlikely, we would like to desnacionalizara the currency and private banks were authorized to issue their own forms of money and decide on their own how to do it,” adds Behan.
Another of the dilemmas of the new governor it is the policy of communication. Carney tried to your arrival to drive-called forward guidance to give clues on future monetary policy, but it was not a great success. Now they have returned to raise voices in defense of that road, as the of Jagjit Chadha, director of the National Institute of Economic and Social Research, who says that “a political orientation more effective on what paths to expect could improve the bank's ability to influence the behavior of the market.” But it doesn't seem easy, especially in a changing scenario as the current one, which has begun to divide the Monetary Policy Committee on whether to raise or lower rates in the medium term. The contraction of the GDP could accelerate a cut in the meeting of 30 January.
Technocrat and well-connected
After the presidential-style and great communicator of Mark Carney, the Bank of England again to have a governor fundamentally technocratic. But that does not prevent him from Andrew Bailey to function very well in the corridors with the political class, especially with conservatives. This quality is attributed a good part of his appointment, which has come despite the fact that some thought their discussed governance of the Authority of Financial Misconduct had descabalgado of the race. Its political discretion and his technical ability have turned him into the governor's ideal time populist who lives in the Uk with Boris Johnson as prime minister.Updated Date: 20 January 2020, 14:00