Mark Carney has been a familiar face in Britain’s economic establishment since 2013 but he will be leaving the post of Governor of the Bank of England on March 16 2020. His departure, delayed from January, comes as the world's central banks react to the coronavirus epidemic. Following the Federal Reserve's emergency 50 basis points cut, the Bank of England slashed rates on March 11, ahead of the Budget, from 0.75% to 0.25%.
As Andrew Bailey, former head of the Financial Conduct Authority, prepares to tackle a bulging intray at the Bank of England, we look at Mark Carney's legacy in four points:
Under Carney's watch, the UK's base rate of interest was cut from 0.50% to 0.25% in August 2016 following the Brexit vote, amid fears over the UK economy. It was then raised to 0.50% in November 2017, then to 0.75% in August 2018.
If coronavirus had not intervened, Carney would have joined the Bank with rates at 0.50% and left with them at 0.75%. but they are now lower than they were in the immediate aftermath of the financial crisis. This has undoubtedly been a boon for homeowners and businesses, but has had big implications for pension funds, savers and retired people who have seen inflation eat into the value of their money as interest rates have remained at rock bottom.
Since taking office in July 2013, much of Carney's time has been taken up with answering questions about when interest rates will go back up. The UK economy had got back on its feet following the financial crisis and other central banks were starting to return interest rates to more "normal levels" - the Federal Reserve put rates up four times in 2018.
“Forward guidance” was the mantra for Carney – a well-flagged move higher in rates to keep homeowners and bond markets on an even keel. Rates had been at 0.5% since March 2009 so any move had to be gradual, he said. Carney was criticised for putting out mixed signals that confused borrowers and investors and he was tagged the “unreliable boyfriend”. Forward guidance was quietly downgraded. More recently, talk about gradual rate increases was overtaken by demands for the Bank to cut rates in response to the coronavirus.
New Bank Notes
Plastic banknotes have been introduced under Carney’s watch, first the £5 note (featuring Churchill), then the £10 featuring Jane Austen as the first female to appear on a UK bank note, other than a monarch. In February 2020, the new £20 featuring JMW Turner came into circulation. A plastic £50 note is due in 2021, featuring computer scientist Alan Turing. The non-regal characters on the £20 and £50 banknotes were chosen by the public.
Carney is known for his cautious approach to forecasts – “the risks are tilted much more to the downside” is a typical quote. So when he stepped into the Woodford Equity Income fund crisis during the summer of 2019, investors took notice. “These funds are built on a lie, which is that you can have daily liquidity for assets that fundamentally aren’t liquid,” Carney said in June in 2019.
It's not the first time Carney has given a notable soundbite. Other examples include this from after the 2016 Brexit vote: “All this uncertainty has contributed to a form of economic post-traumatic stress disorder amongst households and businesses, as well as in financial markets."
Meanwhile, on the limits of monetary policy he said, "We are actors in a play written by others.” And on economic inequality in the west: “Across the advanced economies, employment appears less secure, wages more subdued, and inequality more pronounced."