Adding to a host of new faces already at the Bank, three of the nine
seats on its interest rate-setting committee are due to change hands
between June and August, beginning with BoE banking expert Andy
Haldane. He attends his first rate-setting meeting this Wednesday
after starting this week as BoE chief economist.
Like Haldane, the two other new policymakers - U.S. academic Kristin
Forbes and Nemat Shafik, a top International Monetary Fund official
- fit well with Carney's broader focus on the influence of finance
on the economy.
But as "outsiders", Forbes and Shafik have not followed Britain
closely. This has raised questions about how likely they may be to
challenge Carney - at least initially - on the need to keep interest
rates at rock bottom as the country's economy recovers strongly.
"They probably aren't as well versed in the intricacies of monetary
policy or the situation in the UK," said Peter Dixon, an economist
with Commerzbank in London.
"Consequently they are going to take a bit of time to find their
feet. That might just be sufficient to allow Mr Carney, should he
wish to do, to prevail in his view that rates don't need to rise any
A senior, London-based executive with an investment firm said all
three of the new arrivals, plus recently appointed BoE deputy
governor Jon Cunliffe - who is an expert in international banking -
were unlikely to rock the boat on interest rates.
"While the MPC formally is still nine independent votes, I think
Carney will have a much stronger block vote than Mervyn King ever
had or indeed wanted," said the executive, who spoke on condition of
King, governor of the BoE for 10 years until last year, was the
leading force behind the creation of the MPC but was sometimes in
the minority in key votes.
Since leaving Canada to take over the BoE last July, Carney has had
the backing of all the MPC's members on the need to keep rates at a
record low 0.5 percent. But that unanimity is starting to come under
strain as Britain's economy picks up.
The growing debate at the BoE on when to start weaning the economy
off its stimulus is echoed at the U.S. Federal Reserve which is also
undergoing a shake-up among its rate-setters.
There, former Bank of Israel governor Stanley Fischer and former
U.S. Treasury official Lael Brainard are expected to provide backing
for Chair Janet Yellen's determination to keep on helping the weak
labor market to recover. [ID:nL3N0O177H]
Last month, Carney signaled he was in no hurry to rethink Britain's
ultra-loose monetary policy when he said the economy was only edging
towards a hike in interest rates, despite a plunge in unemployment
and strong house price growth.
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His comments reduced bets in financial markets on the chance of
borrowing costs going up this year. Since then, however, two members
of the MPC have discussed publicly the possibility of starting
gradual rate hikes sooner rather than later.
With the recovery showing no sign of weakening, economists expect
the MPC to split in the coming months when Martin Weale, the member
most concerned about inflation risks, and possibly one or two other
policymakers might vote for a rate hike.
As the debate builds, investors are impatient for clues about the
likely views of the new MPC members.
Haldane said in April he would start his new job with an independent
mind, something he displayed in his previous role which often pitted
him against a powerful bank lobby. "I can certainly assure you that
I will not come in toeing a particular line," he told a panel of
Forbes, who will be an external member of the MPC and follows other
U.S. economists to serve at the Bank, is due to join in July. Shafik,
who will become a new BoE deputy governor, arrives in August
respectively. They have so far declined to comment on their new
Shafik, a former British civil servant, worked on the IMF's efforts
to tame the euro zone's debt crisis while at the Fund.
Forbes was an economic adviser to the White House under President
George W. Bush. She has written extensively about the way financial
crises can spread and on capital controls.
Rob Wood, a former BoE economist who now works for Berenberg, a
bank, said Shafik and Forbes, are likely to be cautious when they
arrive in London as newcomers to the British economic debate.
But once settled in, they would not be afraid to set out their own
views. "These aren't people who are wet around the ears," Wood said.
"They will be completely free from any group-think and they really
are wild cards."
(Editing by Jeremy Gaunt)
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