June 24, 2019 / 2:59 PM / 22 days ago

Breakingviews - Boris Johnson may spice up UK central bank race

Boris Johnson, a leadership candidate for Britain's Conservative Party, gestures during a hustings event in Birmingham, Britain, June 22, 2019. REUTERS/Hannah McKay

LONDON (Reuters Breakingviews) - The race to become Britain’s next prime minister has the potential to spice up a different contest: the one to replace Bank of England Governor Mark Carney.

Britain’s current finance minister, Philip Hammond, wants to leave the choice of Carney’s successor to the next administration, the Financial Times reported on Monday. That normally wouldn’t matter much. After all, most leaders would entrust such an important job to a safe pair of hands. At best they would woo an outstanding candidate, as Hammond’s predecessor George Osborne did when he recruited Carney.

But Boris Johnson, the frontrunner to take over from Prime Minister Theresa May, has a habit of straying from the script. The former foreign minister is deemed so unpredictable that his campaign team has so far sought to limit his public exposure. If Johnson beats the less mercurial Jeremy Hunt, unconventional candidates might therefore stand a better chance of taking over from Carney, whose term finishes at the end of January 2020.

Granted, there are limits to the power a wildcard governor can wield. Each of the UK central bank’s nine-member Monetary Policy Committee has a single vote, so any dramatic changes in monetary policy will depend on Carney’s successor convincing others. But the governor is the most visible face of the institution and his or her words carry particular weight with the public and financial markets. That was certainly the case when Carney moved swiftly to calm jitters after Britain voted to leave the European Union in 2016.

Similar deftness may be needed again as Britain approaches the next Brexit deadline at the end of October. Concern about a disorderly exit is already weighing on sterling, which last week fell to its weakest level against the euro since January.

Carney has angered eurosceptic politicians by warning of the economic risks involved in leaving the EU. If Johnson, who campaigned for Brexit, prioritises the next governor’s views on the EU over gravitas or credibility, investors – particularly foreign ones – might be more apt to sell UK assets.

The ruling Conservative party is so divided over Brexit that whoever succeeds May could soon be toppled. If Johnson becomes a short-lived prime minister, his decision on the BoE may be his one lasting legacy.

Breakingviews

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