LONDON—The British government turned to a top financial regulator as the next governor of the Bank of England, an appointment seen as a cautious choice for a role that will be critical in guiding the economy as the U.K. leaves the European Union.
The government said Andrew Bailey, the chief executive of the Financial Conduct Authority, will assume the new role in March. He will take over from Mark Carney, a former governor of the Bank of Canada, who has headed the BOE since 2013.
“He is the right person to lead the bank as we forge a new future outside the EU and level up opportunity across the country,” Sajid Javid, the U.K.’s Treasury chief, said Friday.
Like Jerome Powell, who took over at the Federal Reserve in February 2018, and Christine Lagarde who last month became the president of the European Central Bank, Mr. Bailey isn’t a specialist in monetary policy.
He has, however, held a number of jobs at the BOE, including as head of the group that studied the global economy. He left the institution in 2016 to become the head of the FCA.
During his previous stints at the BOE, Mr. Bailey wasn’t directly involved in setting interest rates, and his views on monetary policy are unknown. As head of the FCA, he has been a member of the BOE’s Financial Policy Committee, which sets the rules for British banks.
“Bailey is known to be cautious, pragmatic and a safe pair of hands,” wrote JPMorgan economist Allan Monks in a note to clients. “Given his background, Bailey seems likely to offer stability, experience and continuity as governor rather than introducing controversial or radical changes.”
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The U.K.’s planned departure from the EU has been the main challenge facing the BOE’s policy makers since the 2016 referendum. The economic outlook has been dominated by the uncertainties facing businesses and households about the timing and terms of the departure, limiting the BOE’s freedom to change policy.
The central bank last moved its key interest rate in August 2018, raising it to 0.75% from 0.5%.
While those uncertainties have been slightly reduced by Prime Minister Boris Johnson’s victory in last week’s election, they haven’t disappeared. Mr. Johnson’s pledge to not extend a post-Brexit transition period at the end of 2020 means the U.K. could leave the bloc without a free-trade agreement, potentially leading to tariffs and other obstacles to trade.
The BOE has long said that, assuming the uncertainties over Brexit ease and global economic growth steadies, it may gradually raise its key interest rate to a limited degree. But more recently, some policy makers have argued for a rate cut, saying moderate rises in consumer prices and a weak growth outlook made such a move necessary.
Mr. Bailey will take over at a time of greater political scrutiny of central banks, whose public profile rose when they played a key role in guiding economies through the fallout from the global financial crisis. President Trump has been a frequent critic of the Fed’s interest-rate policies, which he believes are too restrictive, while German politicians and economists have attacked the ECB for setting a negative interest rate.
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Most of the criticism directed at the BOE has related to Brexit. Advocates of the U.K.’s departure from the EU have questioned the central bank’s economic forecasts, which they see as too gloomy and reflecting a prejudice against Brexit rather than objective analysis. With Brexit now almost certain to happen before Mr. Bailey takes office, those criticisms may ease.
The appointment comes as the balance between monetary and fiscal policy is changing in the U.K. During Mr. Carney’s tenure, the government cut its spending as part of an austerity program designed to halt and then reverse a sharp rise in its debts in the wake of the financial crisis. The BOE, by contrast, kept its key interest rate low to support growth.
Mr. Johnson has promised to increase investment spending, a move that would share the burden of supporting growth with the central bank.
Mr. Bailey will take over an institution that was transformed during Mr. Carney’s tenure. Mr. Carney was recruited to revamp an institution that was judged to have failed to safeguard economic stability ahead of the financial crisis, and has greatly expanded its regulatory reach. Mr. Bailey is unlikely to have to oversee a similar overhaul.
“It’s not as if you need to reinvent the wheel,” said Gilles Moec, chief economist at AXA Investment Management.
Mr. Carney had initially planned to step down from his role at the BOE after five years, but extended his tenure twice to help steer the U.K. economy through Brexit.
Mr. Bailey will be a familiar face to international central bankers, including those at the Fed. He has worked for both the Financial Stability Board and the International Organization of Securities Commissions. He will be the 121st governor of an institution that was founded in 1694.
Write to Paul Hannon at paul.hannon@wsj.com
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2019-12-20 11:13:00Z
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