As Carney prepares to take control of the Bank of England, former central bank economists say his five years atop the Bank of Canada suggest he will be more inventive and open than the current governor in outlining plans to spur the U.K. recovery.
Although King pursues quantitative easing, the Bank of England rejects a Canadian crisis-fighting strategy — later adopted by Federal Reserve Chairman Ben S. Bernanke — of specifying how long interest rates will remain low. That stance may be revisited if Carney arrives in London in seven months to find the U.K. still stuck in a recessionary rut.
“Mervyn was very proactive in beginning gilt purchases, but he is still less pragmatic than Carney, who may be open to a wider range of options,” said Simon Wells, chief U.K. economist at HSBC Holdings Plc (HSBA) in London and a Bank of England official until last year.
Carney, 47, embraced greater transparency as an emergency tool in 2009 when he promised to keep Canada’s benchmark rate, then at 0.25 percent, low for 15 months as long as the inflation outlook didn’t change. Bernanke followed in August 2011 when the Fed said it would hold its key rate near zero at least through mid-2013, a range it subsequently extended by two years.
Such vows are aimed at adding stimulus to an economy where short-term rates are already around rock-bottom by persuading investors to contain longer-term borrowing costs because they know official rates won’t rise.
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