Mark Carney has said he will extend his period as governor of the Bank of England to June 2019, declining to serve a full eight-year term and instead standing down once Britain leaves the EU.
In a letter to Philip Hammond, the chancellor, Mr Carney said he was “honoured” to serve longer than he had originally intended and hoped his decision would “help contribute to securing an orderly transition to the UK’s new relationship with Europe”.
In response, Mr Hammond praised the governor’s “highly effective leadership” of the BoE and his willingness to serve longer “through a critical period for the British economy”.
The decision will end speculation the governor might step down in 2018, as he had initially agreed when he accepted the post, though he had left open the option of staying for the full eight years until 2021. Sterling traded slightly higher on the news, to $1.225 in afternoon New York trading.
By staying until mid-2019 — when two-year EU exit negotiations are expected to conclude — Mr Carney will remain the most important non-political British economic policy official seeking to maintain economic and financial stability throughout the talks with Brussels.
In his letter, Mr Carney made it clear that his original personal reasons to want to leave before completing his eight-year term still applied. “My personal circumstances have not changed but other circumstances clearly have, most notably the UK’s decision to leave the European Union,” he wrote.
“Recognising the importance to the country of continuity during the UK’s Article 50 [EU exit] negotiations, and notwithstanding those personal circumstances, I would be honoured to extend my time of service as governor for an additional year to the end of June 2019.” This, he said, should help to underpin stability as the UK changes its relationship with Europe.
In reply, Mr Hammond thanked the governor for his contribution to both monetary and financial stability, adding “I look forward to your continuing contribution in the future”.
Though allies of Theresa May, the prime minister, welcomed Mr Carney’s decision to extend his tenure by a year, they said she did not try to persuade the governor to serve his full eight-year term.
Mr Carney’s family will move back to his native Canada in the summer of 2018 after his eldest daughter finishes school, meaning the governor will remain in London for an extra year without his family — underlining the personal issues that weighed on his decision.
Mr Carney has frequently said there were diminishing returns for a central banker serving longer than five years, as it was a punishing job that required total commitment.
In 2013, Mr Carney said: “At the end of a five-year term, I will have served as a governor of a G7 central bank for over a decade. In my experience, there are limits to these highly rewarding but ultimately punishing jobs”. Mr Carney was head of Canada’s central bank before taking the helm of the BoE in July 2013.
The hastily written letters came after weeks of intense speculation over the governor’s future. Mr Carney first opened the door to serving a full term late last year, but initial expectations that he would want to carry on at the BoE were put in doubt by a vicious campaign against the governor, mostly by Conservative supporters of Brexit who say he politicised his position at the central bank.
Andrew Tyrie, a Conservative who chairs parliament’s Treasury committee, chastised both Mr Carney and Mr Hammond for agreeing to short-circuit the eight-year term set in law. “The decision requires a good deal of examination and explanation, which the committee will seek when it next sees the governor in a fortnight,” Mr Tyrie said.
Mr Carney’s decision to stay on indicates an unwillingness to give in to his critics, but also signals some concern at the tone of Theresa May’s speech to the Conservative party conference, which put the BoE’s independence to set policy to hit the inflation target in doubt by suggesting the bank’s policies needed to change.
Number 10 has subsequently reassured the BoE that the prime minister was not criticising the bank’s monetary policy stance, but suggesting the government needed to do more to help some of the losers from ultra-loose monetary policy, particularly those with bank and building society savings accounts.
On Monday, the prime minister’s spokeswoman had said Mrs May would be “supportive” if Mr Carney chose to stay beyond his five years. “The PM has always had a good working relationship with the governor of the Bank of England and intends to continue that.”
Pressed on whether Mrs May saw the governor as “the right man for the job”, the spokeswoman replied: “Absolutely.” Later on Monday the BoE governor met Mrs May at Number 10.
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