Uncertainty Over BoE Governor’s Term Worries Financial Experts

Speculation over the length of Mark Carney’s term as the governor of the Britain’s central bank, the Bank of England (BoE) has market analyst and financial experts concerned about the impact of his decision.

Carney has said earlier that he will be deciding by the end of 2016 if he will serve the full term of eight years ending 2021, or exit in five years in 2018 which was his plan when he accepted the position three years ago.He had citied personal reasons for the truncated term.

As Britain continues to navigate through the uncertainly triggered by the Brexit decision, Carney has been seen as a source of stability.

The BoE took swift action in the aftermath of the June referendum results which eased the pressure on the markets and boosted the economy.

Bank of England

Experts believe that his decision regarding his stay could have wide repercussions on the pound which has been plunging since the Brexit, now down currently by 18 percent since the referendum in June.

In a statement, Jane Foley, a senior foreign-exchange strategist at investment bank Rabobank said,

More uncertainty is not something that would be welcomed. Obviously there’s lots of personal and professional reasons for him to consider, but as far as markets are concerned continuity and communication are going to impact.

Leaving in 2018 would mean that Carney would be exiting in the middle of the two year period when Britain’s exit from Europe will be under negotiations, assuming British Prime Minister Theresa May begins formal separation talks by March 2017 as indicated by her.

Carney has had a fraught relationship with lawmakers, being on the defensive on many occasions after being called too political. He has repeatedly clashed with lawmakers particularly in regards to the BoE’s conduct prior to the referendum. Carney is due to appear before the members of the upper house of Parliament to defend the BoE over its assessment of the Brexit.

While Chancellor of the Exchequer Philip Hammond has said that Carney is doing a good job, former Conservative leader William Hague has questioned the independence of the governor. Prime Minister May has also criticized the BoE’s monetary policy saying that it had badly affected the country.

Carney has repeatedly asserted that the central bank would not take directions from the government. David Owen, chief European economist at investment firm Jefferies has warned that this was not the time for a battle between the government and the BoE over the central bank’s independence.

Derek Halpenny, European head of global markets research at Bank of Tokyo-Mitsubishi UFJ Ltd has predicted that if Carney decides to leave early the initial market reaction would be to sell the pound.

Chad Simmons

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