Who will be the next governor of the Bank of England? The market is waiting with bated breath for Chancellor George Osborne to announce the successor to Sir Mervyn King later today.
Although the current governor (pictured) is not standing down until next summer, Osborne has been busy interviewing the shortlisted applicants over the past few months.
Paul Tucker, currently one of the two deputy governors at the Bank, is favourite for the post, according to Betfair, but until the announcement is made, nobody can be ruled out.
The next governor will have no easy task on their hands. The British economy is expected to continue to struggle and is also feared to slip into a triple-dip recession this winter. This is despite the prolonged period of low interest rates of 0.5% and £375bn in quantitative easing unleashed by the Bank of England’s Monetary Policy Committee.
Further challenges will reveal themselves as the central bank takes over the regulation of the banking sector from the FSA next year through the Prudential Regulation Authority.
With the lacklustre economy and squeeze on liquidity, the banks will need to be careful in ensuring they are lending enough to boost businesses and the consumer without being so lax that we see a repeat of the Lehman Brothers’ collapse and the ensuing credit crunch.
The new governor will also need to consider the most sensible way to unwind the economic stimulus already pumped into the system, which could send inflation spiralling upwards in the years to come.
Investment Week takes a look at the big names in the frame for the job:
As deputy governor, he is widely expected to fill King’s shoes. In a Reuters poll, 22 of 23 economists expected him to be appointed next year. He is likely to be a more practical governor and has voiced his concerns the Bank has “become a speech machine with a central bank attached”.
In 2009 he said King and the Bank should worry less about moral hazard in crises and instead be the “market maker of last resort and capital provider of last resort”. He is also said to want more transparency when it comes to economic modelling and forecasting, and is keen to listen and take advice – something King has not been known for in his eight-year term.
Tucker is supported by many in the City even though he was embroiled in the LIBOR scandal earlier this year as emails from 2008 were published between him and Jeremy Heywood discussing Barclays’ actions.
Lord Adair Turner
As chairman of the FSA, he has less support from the City. However, he has been talking about what he would do should he become governor, indicating his hunger for the job. He believes the Bank should be looking at more unconventional policy measures to avoid the economy slipping into deflation.
He has also talked about "helicopter drops" of money if the economy really did implode. Speaking out after the LIBOR rigging scandal came to light, he said regulation was “flawed” and “dangerous”, implying he may have a heavier touch when it comes to keeping the banks in line.
If Osborne agrees the UK economy needs more innovative ideas than QE and low rates to pull it back into growth, Turner could be a surprise choice.
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