* Carney says very high bar for changing UK
* But ready to consider different options periodically
* May need to commit to maintaining highly accommodative
* "Far from convinced" by idea of targeting growth as well
By William Schomberg and David Milliken
LONDON, Feb 7 Mark Carney, the next governor of
the Bank of England, cooled expectations that he would push for
sweeping changes in British monetary policy, but gave a taste of
the approach he will bring from Canada when he takes over later
In his first detailed comments on Britain's near-stagnant
economy, Carney said on Thursday that committing to keeping
monetary stimulus unchanged for a set period might be needed to
help restore confidence among firms and households.
That is something that Carney introduced at the Bank of
Canada, an unusual step at the time and one which was
subsequently adopted in the United States, adding to his
reputation as one of the world's best central bankers.
But Carney, who will be the first foreigner to run the Bank
of England in its 318-year history, used a question-and-answer
session with British lawmakers to play down speculation that he
would rapidly press for bigger changes at the bank.
He was also quick to note Britain's policy of focusing on
inflation but not at the expense of choking the economy.
"In my view, flexible inflation targeting - as practiced in
both Canada and the UK - has proven itself to be the most
effective monetary policy framework implemented thus far," the
Canadian central bank chief said.
"As a result, the bar for alteration is very high," he said.
However, he said an early debate involving the government
about the details of the bank's mandate would be welcome - in
particular how much time the central bank should take to bring
above-target inflation to heel.
Carney, a 47-year-old former Goldman Sachs banker, takes
over at the Bank of England in July, when Britain's economy will
probably be struggling to put two years of almost zero growth
He said the weak state of the economy would merit monetary
stimulus for a period of time but the Bank of England's
policies to date could prove sufficient.
"It's entirely possible, in fact probable, that the current
stance of policy is consistent with the economy achieving escape
velocity," Carney told lawmakers.
He gave no clear signal that he would push for more
government bond-buying by the Bank of England, stressing the
risks posed by quantitative easing and research by the Bank of
Canada that showed its effectiveness diminished with time.
NO ABRUPT CHANGES SEEN
Sterling rose as investors took Carney's comments to show
little sign of looser monetary policy ahead. The pound
rose 0.4 percent to $1.5720.
But British government debt prices fell as he kept the door
open for a more pro-growth approach in the future and said he
would consider buying assets other than gilts if required,
anathema to the Bank of England's current leadership.
"Some of Carney's comments suggest that he favours some
changes in the BoE's policy framework. Nevertheless, we rule out
that changes will be abrupt as he sounds very keen on
maintaining confidence in the institution's credibility," said
Annalisa Piazza, an economist at Newedge Strategy.
Carney, whose session with lawmakers ran for nearly four
hours, stressed he wanted an early debate on the Bank of
England's remit which has not been seriously reviewed since it
gained operational independence in 1997.
"Although the bar for change ... should be very high, it
seems to me important that the framework for monetary policy
-rightly set by governments and not by central banks - is
reviewed and debated periodically," Carney said.
Not only does finance minister George Osborne set the policy
framework, there is no guarantee Carney could force through
change even if he wanted to.
"Whatever Mark Carney says about monetary policy today, he
will be one member of nine on the MPC, so cannot dictate
policy," former Monetary Policy Committee member Andrew Sentance
Other factors out of Carney's control include the British
government's reluctance to increase spending significantly, and
the recession in the euro zone, Britain's main trading partner.
As Carney was quizzed in Westminster, the Bank of England
opted to keep monetary policy unchanged with interest rates left
at 0.5 percent and no increase in its bond-buying programme.
Carney will take over the Bank of England when it is still
smarting from criticism that it was slow to act at the start of
the 2008-2009 financial crisis and of being burdened by an
over-hierarchical culture under current Governor Mervyn King,
accused by some critics of acting as a "Sun King".
Asked about his ideal management style, Carney said: "It
can't be an emperor, it's more a managing partner."
Several lawmakers on the Treasury Committee shared jokes
with the Canadian and they endorsed his nomination, although
they lacked powers to block it. Some questions about his 874,000
pound ($1.37 million) annual remuneration did not ruffle Carney.
"You will be paid considerably less than English football
managers and I think you will have more success than them," said
one member of parliament, David Ruffley.
After taking over at the Bank of Canada in 2008, Carney
earned a reputation for protecting his home country from the
global financial crisis. He promised to keep Canadian interest
rates near zero for about a year in April 2009 as the crisis
intensified, an idea later taken up by the U.S. Federal Reserve.
That kind of approach has raised eyebrows at the Bank of
England. Several top officials have said it is not needed, in
part because of concerns it could stoke the country's
persistently above-target inflation. Carney himself said it
would have to be seen whether it would be suitable for Britain.
He also noted how the U.S. Federal Reserve recently set
inflation and unemployment thresholds to help signal when it
will raise its near-zero interest rates to boost confidence.
Carney said any move to such a system in Britain would
depend on how quickly the bank would be expected to correct any
overshoot in inflation expectations.
He was cool on the idea of setting a higher inflation target
than the Bank of England's 2 percent.
"In my view, moving opportunistically to a higher inflation
target would risk de-anchoring inflation expectations and
destroying the hard-won gains that have come from the
entrenchment of price stability," Carney said.
And he sought to play down previous comments that, in times
of crisis, central banks might consider targeting a mix of
inflation and growth rates instead of just inflation.