Half Marks

More Carney sounds better for BoE than for him

More Mark Carney sounds better for the Bank of England than for him. During an interview with the Financial Times published on December 17, the governor of the UK central bank refused to rule out staying on for three years longer than he planned. Carney has done well so far, but implementing reforms and steering an unbalanced economy look like tough challenges. Add the risk of Britain leaving the EU, and staying may have diminishing returns.

Carney has made tangible progress since he started in mid-2013. First, he has made sure that UK banks now have sufficient capital to withstand adverse scenarios. Second, his willingness to embrace reform at the central bank itself is making the institution more effective and accountable than it had seemed under his predecessor Mervyn King. That includes fusing departments and publishing full minutes of monetary policy meetings.

His track record on the economy is less glorious, although it is hard to fault Carney's actions. The UK economy remains a prisoner of its own imbalances and international pressures. The runaway housing boom and population's addiction to credit would justify increasing rates. Yet, the economy remains fragile, inflation weak, and the UK's main trading partner, Europe, is weakening its currency by printing money. In managing these tensions, Carney has fared no worse than any central banker trying to set policy in uncertain times.

These pressures are likely to build in the outer years of an eight-year reign. If Carney is unsuccessful in reining in credit, it is likely to become far more problematic when the economy turns. A recession is overdue. The temporary gain created by cheap credit will be forgotten, and Carney could be blamed for the population's excesses. Were the UK to leave the European Union, Carney would face much worse: a weakening currency and an economy decimated by the weakening of its financial services sector.

If Carney has decided to stay, the decision may be a vote of confidence that the worst won't come to pass. It may be a sign of genuine affection for the UK and London. It would certainly be good for the Bank of England, providing stability of tenure. But, the ex-banker in Carney would recognise a trade where the risks outweigh the rewards.