OTTAWA – When it comes to monetary policy, it’s not always about who says what – nor even really the things they say. It’s more about the way they say it and to whom.
Case in point: Mark Carney’s comments towards the U.K.’s treasury committee Tuesday.
The head of the Bank of England, and former governor of Canada’s central bank, ruffled lawmakers’ feathers as he ublicly acknowledged the obvious: A victory for proponents of Britain’s exit in the Eu, which goes to referendum on the June 23, might take a big chunk out of the country’s US$2.9-trillion economy.
Nothing new there – that’s always been the concern of these in opposition to a British exit, or “Brexit.”
But markets being what they are, the British pound immediately lost the most in 2 weeks from the euro currency.
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As well, Carney told the committee the country could lose banking institutions – and foreign investment, together with them – in the event the “Leave” camp was victorious.
“I’d say a number of institutions are contingency planning that possibility,” Carney warned.
“There might be lower levels of activity due to the degree of uncertainty that could affect investment and household spending,” he explained. “To state the most obvious, economic questions are essential questions with regards to the broader decision the people of the U.K. have to make.”
The pound lost 0.8 per cent of its value on Carney’s comments, falling to 77.832 pence against the euro – the largest drop since Feb 23.
All which begs the question: Has got the bank governor overstepped his purview as monetary chief?
In the past, Carney has stated he wanted to do not be drawn into the Brexit debate, a difficult task once the “Leave” and “Remain” sides happen to be firing up the rhetoric and his ultimate boss, U.K. pm David Cameron, is risking his political future on keeping the nation within the EU.
Why don’t I become a circus clown?
The governor has, until now, maintained that monetary policy officials would not provide an assessment on the impact of the British withdrawal in the EU. But on Tuesday, one U.K. lawmaker questioned Carney’s impartiality.
“You are developing the standard pro-European Union group” lines, said Jacob Rees-Mogg, member of the ruling Conservative Party. “It is beneath the dignity from the BOE to become making speculative pro-EU statements.”
Carney, of course, denied his position parroted that of the U.K. government.
“We weren’t relied on by anyone,” he told the committee. “It would not make a difference if they tried.”
But history shows the present BoE governor is not shy when it comes to exceeding expectations on policy remarks.
In fact, before leaving Ottawa for London in 2013, Carney had been noted for scolding Canadian manufacturers for located on “dead money” rather than investing their funds holdings to grow export markets, or arguing this year from the view that a Canadian version of so-called “Dutch Disease” – a phrase originally accustomed to explain the decline in factories within the Netherlands as oil production increased that nation’s wealth in the 1970s – was hurting western provinces.
Then there is Liberal affair – a rumour denied by Carney but relentlessly pursued through the media – by which he would be put up as an alternative leadership candidate to Justin Trudeau.
The governor’s response was pure Carney: “Why don’t I become a circus clown?”
Outside the entertainment ring, central bankers have often been more than dry monetary functionaries.
Take Mario Draghi, the head from the European Central Bank, who this year – with only one line – possibly changed the course of a then-fracturing continent, promising to do “whatever it takes” to fix the single-currency zone. “And trust me, it will be enough.”
Draghi’s comments bolstered the euro, proof that, for central bankers, sometimes speaking their minds can in fact pay off.
Financial Post
gisfeld@nationalpost.com
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