Like almost anyone starting a new job, Mark Carney showed up early for his first day as Governor of the Bank of England and he even took the subway to work.
Mr. Carney smiled as he strolled into the bank’s head office on Threadneedle Street in the heart of London’s financial district just before 7 a.m. Monday. He looked at ease, considering he is now one of the most powerful people in Britain and the first foreigner to run the Bank of England in its 319-year history.
The man from Fort Smith, NWT, couldn’t have asked for a better first day. The sun shone. The stock market rose. Figures came out showing the British housing sector improving and manufacturers had enjoyed their best monthly output in more than two years.
But not all is well. There are growing concerns Mr. Carney faces impossibly high expectations, and indicators show the economy has fallen further behind where it was before the financial crisis in 2008.
Given “the hype surrounding his arrival, the potential for disappointment has to be fairly high,” Michael Hewson, a senior market analyst at CMC Markets in London, wrote in a report released Monday. “Never has been so much been expected from someone not elected to public office.”
The size of Mr. Carney’s compensation package piles on the pressure to perform. Taking the London underground certainly makes him look like a regular worker, but he is the best paid central banker in the world with a pay packet that is close to $1.4-million a year and includes a $400,000 housing allowance. (U.S. Federal Reserve Board chairman Ben Bernanke is paid about $200,000 (U.S.) annually). He has already faced tough questions about his pay, and defended it by saying he is not receiving a pension from the Bank of England and is moving from a relatively inexpensive capital city, Ottawa, to one of the world’s most most expensive.
Mr. Carney will also have duties beyond those of his predecessors. The government recently gave the Bank of England a range of powers and he will be the first governor to execute them. Besides helping to set interest rates, he will oversee the financial sector and play a role in decisions about the fate of the Royal Bank of Scotland and Lloyds Banking Group. Both received massive taxpayer bailouts and remain partly government owned.
Among Mr. Carney’s first tasks will be to modernize the stuffy culture at the Bank of England. British MPs have long complained about its hierarchical structure where everyone works to please the governor and frank discussions are discouraged. They have demanded more accountability and openness, particularly now that the bank has so many new powers.
“It’s a big institution, an institution with a lot of history,” said economist Jens Larsen, a former Bank of England official who now works for Royal Bank of Canada in London.
“It will be a big challenge to make the organization do what he wants,” Mr. Larsen said, pointing out that Mr. Carney is taking over after the 10-year reign of Sir Mervyn King.
“The Bank of England I knew was much more focused on monetary policy. It was run by economists for economists, you could say, and I think Mark Carney’s Bank of England will be a very different kettle of fish,” he added, referring to the bank’s new broader powers.
Another critical decision for Mr. Carney will be whether Britain should boost its already massive quantitative easing program, or QE, through which the bank effectively pumps money into the economy in the hope of stimulating growth. So far, the bank has poured out £375-billion, or about $600-billion, through QE and Sir Mervyn had wanted to keep going. Now, Mr. Carney will have to decide whether that is the best course of action.
He won’t be able to do whatever he wants. Unlike the Bank of Canada, where Mr. Carney effectively made all the decisions in private, he is now just one of nine votes on the bank’s Monetary Policy Committee, which sets interest rates. It is not uncommon for the governor to be outvoted. Minutes of the committee’s monthly meetings are also made public, giving analysts and the media a regular opportunity to examine Mr. Carney’s approach. He won’t have much time to prepare either: the next MPC meeting is Wednesday.
He is already getting plenty of free advice. In an open letter released Monday the British Chamber of Commerce urged him to expand QE while a former Chancellor of the Exchequer called on him to hold back.
For now, though, Mr. Carney, 48, appears to be enjoying his post. And the whole city seemed to get caught up in his arrival Monday, with Canada Day celebrations in Trafalgar Square and BBC television broadcasting part of its flagship morning news program from the City, featuring several interviews about Mr. Carney. Another television crew tracked down Canadians on the streets outside the Canadian High Commission and asked their thoughts on the arrival of the former governor of the Bank of Canada.
By late afternoon Monday, the bank released a slew of photographs showing him getting a briefing on the MPC, walking briskly through gleaming hallways and arriving at work early, smiling.