Governor Carney: Same remit, new ambition
Mark Carney confirmed this week that he was a good performer and a careful central banker.
But not that careful. You couldn't listen to his hours of testimony and not come away with the impression that he expects and wants the Bank of England to do more to support the recovery. Also, that he has in mind a longer list of potential tools than the current leadership of the Bank.
What kind of tools? There was a long list. But the larger point was that he thinks "doing more" means thinking beyond creating more money.
When pressed to say whether more quantitative easing would have the desired effect, the incoming governor said, matter-of-factly, that Bank of Canada research had concluded the policy was having diminishing returns, especially in the US. He added this was "not surprising".
Sir Mervyn King has been asked the same question, many times. He has never wanted to entertain the idea of diminishing returns to QE - or not without long and complicated caveats.
Dr Carney was also quite forthright about the potential usefulness of pre-committing the Monetary Policy Committee to keeping rates low for a certain period of time.
Most intriguing, perhaps, he also talked about linking policy explicitly to developments in the real economy: the unemployment rate, for example. He went out of his way to suggest that the Federal Reserve's experiment along these lines, started last autumn, might be relevant to the UK.
Again, Sir Mervyn hates all this. He thinks it's counterproductive for the Bank to tie its hands in advance, as the Bank of Canada did a few years ago. (The fact the Canadians later had to go back on that commitment might seem to help his argument.)
As for tying them to the unemployment rate, as the US central bank has done - well, you get the impression that Sir Mervyn and his deputies think that is downright potty.
All in all, I suspect the MPs felt they had received their due. Facing four hours of detailed questions, of varying quality, Dr Carney was respectful, but also confident. He did not fawn.
Do we know more about his monetary policy views than we did before? Yes we certainly do. In fact, we got 44 pages of them, before he had even sat down, in his written answers to the committee's pre-hearing quiz.Radicalism constrained
The headlines from those answers were (and before you ask, I do realise they wouldn't be everyone's idea of a tasty news story):
- He thinks the bar for changing the inflation target regime is very high, because this is the best system that central banks have ever tried.
- He wouldn't favour raising the target from 2%, nor does he think a price level target would be remotely appropriate to the UK right now, because our inflation has been too high, not too low.
- But he does think a debate about the UK monetary policy framework, and alternatives to it, would be helpful - provided it is resolved quickly, probably in favour of the current regime or something very close to it.
- And yes, he does think the theoretical case for targeting the level of cash GDP, in the precise circumstances now facing the UK, is quite strong and worth debating.
But note that is a theoretical case. In practice, he made clear - in his written answers and his testimony - that he didn't think a nominal GDP target would trump the current system, even in the current climate.
That's for all the reasons discussed in my previous blogs on this, including the basic problem that the public might not be able to work out what on earth the Bank was up to.
Is Governor Carney going to drag the Bank of England kicking and screaming into the 21st Century and turn the UK monetary policy framework on its head?
My short answer to that is no, for the rather obvious reason that he's already the Governor of a G7 central bank whose approach and policy target is pretty similar to ours.
As he kept pointing out, there are also going to be constraints on his radicalism - not least the monetary policy framework itself, and all those other people on the Monetary and Financial Policy Committees. And he likes the inflation target the UK has now.
My slightly longer answer to the question is "no, but."
Listening to the future governor yesterday, I couldn't help thinking that he might change the attitude to economic policy in the UK, by reminding us that what we're living through is not just "exceptional" - a word he used a lot today - but worth getting worked up about.
Put it another way: he may have no burning desire to change the Bank's formal target, but you can't help thinking Governor Carney will raise the bar for the economy more generally.
Many in Westminster and beyond have started to think 1% growth in a year is a good result in an economy that is still 3% smaller than it was five years ago and in which nearly 20% of young people not in full-time education are out of work.
This isn't a party political point: it's a statement of fact. We have all got rather used to a flat economy. Any GDP number with a plus sign in front of it is starting to feel like an achievement.
The director of the IFS, Paul Johnson, said this week that we shouldn't lose our sense of "shock and awe" at what we've been living through. To judge by his testimony, Mark Carney hasn't lost it yet.
Perhaps he will conclude, like Sir Mervyn King, that there is not much that the central bank, or anyone else, can do to make this process of economic rebalancing any easier, or shorter. But he doesn't seem to be quite there yet.
We've spent months debating the finer points of Mark Carney's monetary policy philosophy and the difference it might make. We may have missed the most important thing separating him from every other senior policy maker in the UK, and the best reason for the chancellor to import him.
Governor Carney has not spent the last five years living in the UK; he's been living in a country that's been doing a lot better. That might end up making quite a difference.