On Monday, the Old Lady of Threadneedle Street proved that she’s still got some tricks up her sleeve. The Bank of England (located on Threadneedle Street in London since 1734 – hence the name) shocked almost everyone by announcing that Mark J. Carney had been selected as Mervyn King’s successor as governor of England’s central bank. I say “shocked” because Carney wasn’t exactly the odds-on favorite for the job…and he’s not a British citizen. You see, Carney’s Canadian…in fact, he’s currently the head of the Central Bank of Canada. The man almost everyone thought would be the next governor of the BoE was Paul Tucker, who is currently the deputy governor at the BoE. He’s been at the BoE since 1980, so it’s not too much to say that practically everyone concerned considered him a shoe-in for the job.
This marks the first time in history that a non-UK citizen has been appointed as governor of the BoE, though there have been several U.S. economists who served on the Monetary Policy Committee in recent years. Yet of all the countries the United Kingdom could poach a central bank head from, at least Canada still has Queen Elizabeth II on the C$20 note.
In his high-profile speech to the New York Economic Club yesterday, Fed chairman Ben Bernanke didn’t give any new thoughts on monetary policy. He did reaffirm his view from September – that the Fed will be accommodative not just until the economy recovers, but until it’s clear that the recovery is sustainable.
…we expect – as we indicated in our September statement – that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In other words, we will want to be sure that the recovery is established before we begin to normalize policy.
However, there were some interesting thoughts about the fiscal cliff (a term that Bernanke himself coined) and on where we are headed post-cliff. First, and not surprisingly, Bernanke was really concerned about the fiscal cliff and the elevated risk of a recession if a deal is not reached. Second, though, dear Ben was downright sunny about the U.S. economy in the event that Washington can make a deal on fiscal policy. Read more
That’s not tea brewing in Japan; it’s a bit of a political and economic storm. Oddly though, this isn’t a clash between Yoshihiko Noda, current prime minister of Japan, and Shinzo Abe (Noda’s presumptive successor if current polls are to be believed). Rather, there’s a growing enmity between Abe and the governor of the Bank of Japan, Masaaki Shirakawa. Abe, leader of the Liberal Democratic Party (LDP), is ahead in current opinion polls and could likely become the next prime minister. He’s also got some pretty bold ideas on monetary policy; bold enough that he’s been getting jabs from Shirakawa, whose term as Japan’s head central banker expires in April 2013. And these statements are causing market movement.
Janet Yellen, the vice chairman of the Federal Reserve, is the latest in a string of Fed bigwigs to get behind an idea of using explicit inflation and unemployment targets to inform the market about the Fed’s future plans – forward guidance, in Fed-speak. During a speech to the Haas School of Business at the University of California, Berkley, Yellen endorsed the idea of moving beyond calendar-date approximations as the means of conveying information on the Fed’s future moves. Now, she stopped short of actually naming any sort of numbers, but this seems like a good direction for the Fed to move. Ms. Yellen knows what she’s talking about too; in 2010, Fed chairman Ben Bernanke appointed her the chair of a new FOMC communications subcommittee. Not to mention that if Bernanke decides not to accept a third term at the head of the Fed, Ms. Yellen is widely seen as first in line as his replacement.