Andrew Bailey, currently head of the Financial Conduct Authority and a former deputy governor of the UK central bank, will take on the job when Carney steps down in March. Carney was appointed in 2013 for a five-year term but his departure from the bank has been delayed three times because of the confusion surrounding Britain’s exit from the European Union.
Bailey can look forward to greater clarity on Brexit following Prime Minister Boris Johnson’s clear victory in the UK election last week.
“When we launched this process, we said we were looking for a leader of international standing with expertise across monetary, economic and regulatory matters,” UK Chancellor of the Exchequer Sajid Javid said in a statement. “In Andrew Bailey that is who we have appointed … He is the right person to lead the bank as we forge a new future outside the EU.”
With a big majority in parliament, Johnson’s government is poised to take the United Kingdom out of the European Union by January 31, more than three years after the country voted to leave the bloc. Britain will then enter into a transitional period that maintains existing trading arrangements while the new terms of its relationship with the bloc are hammered out.
That doesn’t mean the new governor has a smooth road ahead. Economists aren’t sure how the UK economy will fare in the next year as negotiations continue. There’s also concern that the country will run out of time to clinch a deal before the transitional arrangements expire at the end of 2020, raising the prospect of a damaging rupture of trade ties with the bloc.
The pound, which had raced to its highest level since the middle of 2018 following the election, shed all of those gains this week as Brexit anxieties resurfaced. It’s now trading back near $1.30.
How monetary policy will unfold over the coming year is hard to predict. Some economists expect wage growth and consumer spending to start pushing up inflation, boosting the case for an interest rate hike. Others fear that ongoing uncertainty about a possible cliff-edge late next year, or whether Britain will stay on close terms with the European Union, could weigh on business investment, holding back the economy. That could put a rate cut on the table.
“It’s not the time for a maverick and Bailey will be ready to turn either way on rates depending on how both Brexit and global trade pans out next year,” said Jasper Lawler, head of research at London Capital Group.
Political risks haven’t disappeared entirely, either. Nationalists won a big victory in Scotland in the UK election and are already pushing for a referendum on independence.
Bailey will be the 121st governor of the Bank of England since it was founded 325 years ago. He has been appointed for an eight-year term and will receive a salary of £495,000 ($645,000).