Mark Carney walked into the lion's den this morning and emerged unscathed in the afternoon after more than three and a half hours of interrogation by British MPs. The Treasury Select Committee were unable to deliver a scalp or even a tuft, just a strand of hair – the future Governor of the Bank of England said he wants a public debate about the future of inflation targeting, currently the Bank of England's sole remit in the conduct of monetary policy in the U.K. .
Rumours have been running riot for several weeks that the Canadian was in cahoots with George Osborne, the Chancellor of the Exchequer, to widen the Bank's brief to one that more aggressively pursues economic growth. The choice of a foreigner, Mr. Carney, over internal Bank of England and other British candidates, was widely seen as a signal that the Treasury is not happy with the monetary rigour imposed by the current governor, Sir Mervyn King. Only a fortnight ago, Mr. Carney seemed to suggest that central banks might need to reconsider their inflation targets if growth continued to be elusive.
Even on the eve of Mr. Carney's appearance before the committee, the Chancellor was urging his new man to wield a new broom. According to the Financial Times, he said yesterday that monetary policy action by the Bank of England "can and should continue to support the economy."
In other words, Mr. Osborne seems to want the Bank to pursue the sort of dual mandate currently held by the U.S. Federal Reserve, to act in the interest of the broader U.S. economy and not just preserve the integrity of the dollar.
However, pressured by MPs on this point, the suave Mr. Carney remained as elusive as the prized economic growth targeted by the U.K.'s Treasury. He insisted that "flexible inflation targeting," which he said was the practice both in both the Canadian and British central banks, was "the most effective monetary policy framework."
Mr. Carney also suggested that the U.K. could benefit from periodic reviews of the framework, as is the practice in Canada but on his first public outing, He was careful not to show he was the Treasury's patsy. "The bar for change is high but there should be a debate," he said. He dismissed the idea of "helicopter money," or using the bank's printing presses to pad the consumer wallet. "I cannot envisage a situation where I would support that strategy."
It was a smooth performance and the Treasury Select Committee seemed to be charmed, even perhaps a little bored by the Canadian's very careful responses to the lengthy grilling. The British MPs were bemused by the frequent references in Mr. Carney's written submission to the virtues of achieving consensus, the basis on which the Bank of Canada reaches monetary policy decisions. It is in contrast to recent public criticism of Sir King, whose alleged domineering influence at the Bank of England, has been caricatured as that of a "sun king."
Still, even if Mr. Carney feels relieved after his first joust in Westminster, he will know he is still on honeymoon. The Chancellor's bullying message in the morning papers will give him ample warning that he risks being sandwiched between a panicking government in Westminster and disputatious colleagues in the City of London.
But whatever he does, half of the British population will always have a soft spot for Mr. Carney. When asked why he had changed his mind after turning down the chance to apply for the Bank of England job last summer, he explained that the government's decision to shorten the term to five years fitted in better with his children's schooling.
"Your daughters were decisive [ in your decision to take the job]?" asked the Committee chairman.
"Yes," said Mr. Carney.