Mark Carney, soon to be Governor of The Bank of England, was invited into Parliament to be questioned by the Finance Select Committee on how he will run our economy when he arrives here in a couple of months time. Mr Carney has already put down a marker with George Osborne, letting him know that he will be setting the pace on economic policy. Before arriving at Threadneedle Street he has confirmed that flexible inflationary targets are now the thing. So out goes the fixed target of 2% that Mervyn King has had to work within. In practice this means being able to ignore inflationary pressure if other indicators, like growth, demand more attention. He will set economic policy not the Treasury.
The old lady of Threadneedle Street
So what will George Osborne do all day, after Carney arrives? Hopefully not much as everything he has tried in the last 30 months has been a disaster. The bad news is that Carney doesn't arrive until after the coming budget - let's hope he will be coaching George from the sidelines. The performance of George Osborne reminds me of a soldier who when ask what sort of Generals are the best, replied 'the lazy ones'!
Blow up your own target!
The current Governor, Mervyn King, was the architect of fixed inflation targets back in 1992. In reality flexible targets probably won't make much of a difference, as over the last 3-4 years the Bank of England have ignored the 2% inflationary target. Allowing the economy to run on with low interest rates and high inflation quite irresponsibly I have discussed the impact of these low interest rates before: some positive side effects like growth (no much admittedly) and mortgage relief but more negatives impacts including the decimation of savings and rise of zombie companies. So, Mr Carney feel free to blow up your own target, we're used to it!
Any way its will be good to get the new Governor in place, hopefully before Osborne does too much more damage.