BoE’s Carney Favors Rate Plan Copied by Bernanke

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.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell