Shakeup at the Bank of England could bring a hawkish surprise
Sweeping changes are on the way at the top of the Bank of England, with the IMF’s Nemat “Minouche” Shafik hired as deputy governor for markets and banking, and MPC member Ben Broadbent promoted the deputy governor for monetary policy.
The changes this summer will also lead to Andy Haldane becoming chief economist, and markets boss Paul Fisher getting a new position at the Bank.
Dr Shafik is experienced across international policy and market operations – she led the IMF’s bailouts of Greece and Portugal for instance – but is something of an unknown quantity in monetary policy terms.
Her recent speeches drop a few hints at what stance we can expect her to take on the MPC. Dr Shafik has called for central banks to renew their focus on fighting inflation, suggesting she could be relatively hawkish.
“I think we all agree that inflation is the most regressive tax, and that the poor are best served by a central bank that can deliver clear and credible, low and stable inflation. Inflation doesn’t have to be the only objective of the central bank,” she said in January at a Centre for Advanced Financial Research and Learning event in New Delhi.
“Central banks can have other objectives, such as employment or growth. But again the one thing that is really important is that we are clear about what we are asking the central bank to deliver.”
But she is enthusiastically on board with the trend for more verbal guidance to markets from central bankers.
“One of the most important tools of central bankers is communications—what we now call open mouth operations,” she said last March.
“Central banks often don't have to buy anything to move markets—they just have to say something.”
Other changes at the top of the Bank include the hawkish chief economist Spencer Dale leaving the MPC to become executive director for financial stability strategy and risk, on the Financial Policy Committee (FPC).
His role on the monetary policy committee (MPC) will be taken by the free thinking financial stability boss Andy Haldane, who moves off the FPC and become chief economist.
Meanwhile Ben Broadbent is taking the job of deputy governor from the retiring Charlie Bean.
And Paul Fisher is leaving the MPC, as his position as executive director for markets is taken over by Shafik.
However, Fisher is not expected to leave the Bank – it is thought he is getting a major new post when Mark Carney tonight announces the fuller shakeup of the Bank’s structure and strategy.
Meanwhile Anthony Habgood will take over as chair of the court of the Bank of England, replacing Sir David Lees and taking responsibility for governance and overviewing strategy.