All change at the Bank

Mark Carney has led the Bank of England since 2013. As Governor, Chair of the Monetary Policy Committee, Financial Policy Committee and the Prudential Regulation Committee he has helped steer the bank and the country through some turbulent times.

Now, with Brexit looking imminent, he is ready to step down from what could be seen as the most important job in UK finance. Mr. Carney has delayed his exit from the BOE twice because of Brexit but has said he won’t do so again and will definitely leave in the early part of 2020.

His replacement is Andrew Bailey, who will become the 121st governor of the Bank of England on 16 March, for an eight-year term, having already spent 30 years at the Bank. He has a varied career, and is currently chief executive of City watchdog, the Financial Conduct Authority (FCA).

At Continuum we are asking what a new man at the top might mean for your money.

What does the Bank of England governor do?

The Bank of England is the UK’s central bank, and its main focus is managing the overall state of the economy and ensuring the stability of the financial system. It can lend to other banks, controls the supply of cash and credit in the UK, and perhaps most important of all sets the base rate. This is the rate at which banks can borrow which underpins almost all credit arrangements, from funding major projects like HS2 to the cost of your mortgage.

Mr Carney has provided a firm hand on the economic controls, seeing the country through a period of record low interest rates, as well as raising rates in what seems to have been a successful attempt to control inflation.

Of course, the Governor does not make decisions alone. There are four deputy governors, and the Monetary Policy Committee with a total of nine members and a treasury representative – but it is generally felt that the decisions made by the governor reflect his or her personal judgment and attitude.

The approach of Mr. Bailey could therefore have a big impact on the financial future of the UK.

So what is he going to do now?

Although he has announced his intention to carry on the policies adopted by his predecessor, this may simply be a nod of respect to the outgoing Governor.  When Andrew Bailey takes over in March, Bank watchers expect him to return to the more conventional operation of monetary policy followed in the past.

“The Bank has a very important job and, as governor, I will continue the work that Mark Carney has done to ensure that it has the public interest at the heart of everything it does.”

Andrew Bailey

A new governor will invariably have some new ideas, and one of these already signals a break with those of his predecessor.

Mark Carney introduced ‘forward guidance’ where the Bank linked the level of unemployment with interest rates. This meant that if less than 7% of the workforce were jobless rates would rise – but when the jobless total fell below this level, rates actually stayed the same. Mr. Carney insisted that the policy was working, but the speculation is now that Mr Bailey will use his first press conference as Governor, on May 7, to scrap the policy – and that he might not stop there.

What does this mean for your money?

Obviously, the big challenge for the new governor will be Brexit and keeping the UK economy on track in uncharted waters. With interest rates still low, there seems to be little room to cut them further if the post-Brexit economy needs a boost.

Mr Bailey may have some other ideas, and we will need to wait until May to know exactly what they are.

In the meantime, it might be prudent to look at your own financial arrangements. A financial review, and perhaps some changes to your portfolio to help it weather any uncertainties might be a good idea. Naturally, at Continuum, we would be very keen to help.  Simply give us a call for the expert support you need.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

The value of investments can fall as well as rise and you may get back less than you invested.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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