OTTAWA, April 24 The next Bank of England
governor Mark Carney said on Wednesday a key lesson he will
bring from Canada to his new job is the need for clear
objectives and communication about what exactly the central bank
aims to achieve with its policies.
Carney, who steps down as Bank of Canada chief in June to
take over at the Bank of England in July, said that during the
2008-09 recession in Canada, having a well-understood inflation
target helped policy makers explain directly to Canadians how
they planned to stimulate the economy and boosted confidence.
"I think the core lesson that was reinforced and that I have
an even greater appreciation for now than I had when I started
as governor, is the importance of having clearly articulated
policy frameworks," Carney said when asked what lessons he would
bring to the Bank of England.
"That's not a very snappy thing to say but it's absolutely
essential," he said in his testimony to a Senate committee.
Expectations are high for Carney as he gears up for a
daunting task: turn around Britain's ailing economy, fix its
banks and overhaul the Bank of England.
Under his watch, Canada's recession was milder than that of
the United States or the United Kingdom and it has since
recovered. At the height of the crisis, the central bank dropped
its key interest rate to an ultra-low level of 0.25 percent and,
in its most innovative move, pledged to keep the rate at that
level for more than a year unless inflation picked up.
Carney said Bank of Canada officials "reached over the heads
of commentators and spoke directly to Canadians" about the low
cost of borrowing, persuading them to spend and boost growth.
But the bank never had to resort to unconventional policy
such as buying bonds, as done in the U.K., the U.S. and Japan.
Despite the differences with the U.K., Carney stressed that
unconventional policy should also be guided by clearly
communicated principles and frameworks that the public can
"I prefer not to comment too much on the U.K. but I think
the benefit of the institution to which I'm going, one of the
benefits, is a tremendous amount of thought has been given ...
by the institution itself but ultimately decided by the
government and parliamentarians, to the framework that the Bank
of England has," he said.
The Bank of England has much broader powers than the Bank of
Canada, encompassing regulation of banks and financial stability
as well as monetary policy. Each area of work should have its
own separate framework, Carney said.
"And they also have to think through, and they have thought
through, how the three of those interact within one
institution," he said.