Governor Carney steps up to the plate

With the pound plunging, confidence slumping and contagion spreading to real estate funds, Mr Carney remains the primary linchpin of stability.
With the pound plunging, confidence slumping and contagion spreading to real estate funds, Mr Carney remains the primary linchpin of stability.

LONDON • Bank of England (BOE) governor Mark Carney has unveiled his four-point plan to cope with the Brexit crisis and it's just about the only one Britain has to go on.

From the moment on June 24 when the pound first hit a three- decade low, to his press conference on Tuesday, the United Kingdom's Canadian-born technocrat-in-chief has shone a path forward for the country at a time when no elected politician is around to do so.

With the pound plumbing new depths, confidence slumping and contagion spreading to real estate funds, he remains the country's primary linchpin of stability.

The former Goldman Sachs Group investment banker, a veteran of the 2008 market storm, chaired an initial meeting of the Monetary Policy Committee yesterday as the BOE's crisis response enters a new phase of trauma therapy for a battered economy.

Officials still in firefighting mode are poised to make a sober assessment of the policy outlook, based on scant data that has so far pointed to a slowdown.

That forward-looking approach has defined the BOE since the vote outcome became clear and the pound slumped.

In London, as policymakers assessed the situation on the morning of June 24, results were still coming in, but they could see the outcome was clear. Shortly after the pound's drop, UK Independence Party leader Nigel Farage was calling on Prime Minister David Cameron to quit.

Investors sought reassurance. They got it. Within three hours, before UK bonds had started trading, the BOE issued a statement declaring it would take all steps to meet its responsibilities.

Still, political disorder spiralled. Mr Cameron resigned. His exit was matched by shadow Cabinet resignations in the opposition Labour Party, culminating in a no-confidence vote against leader Jeremy Corbyn.

Against that backdrop on June 28, the Financial Policy Committee, responsible for the banking system's stability, met for a quarterly gathering. A week later it announced that it had decided to cut lenders' capital requirements to spur lending.

On June 29, Mr Carney summoned the chiefs of the biggest UK banks to offer reassurances. Standing before a hastily invited audience of journalists and members of the finance industry, he delivered a two-pronged message.

He pledged to support the economy and defended his own position, including his pre-referendum warnings of the dangers of a vote to leave. "What we said in terms of the risks to the economic outlook, in terms of the risks to financial stability - does anyone in this room not think that those risks have begun to manifest?" he asked.

"So we did our job."

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A version of this article appeared in the print edition of The Straits Times on July 07, 2016, with the headline 'Governor Carney steps up to the plate'. Print Edition | Subscribe