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Who Will Be the Next Governor of the Bank of England?

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After nearly six years occupying the top job in British monetary policy, Mark Carney is now less than a year from the end of his term as the 120th Governor of the Bank of England, and the UK government has formally begun the search for his successor.

It is difficult to know with certainty which individuals are being actively considered for the role at this point, especially given the well-established ritual of humility whereby all the likely candidates publicly claim to be entirely uninterested in claiming the most powerful job in the British monetary regime. This ambiguity has left room for considerable speculation about who might be in the running, with the financial press making more-or-less credible suggestions that the role could be offered to anyone from former Fed chair Janet Yellen, to Managing Director of the IMF Christine Lagarde, to even the British Chancellor Philip Hammond himself.

However, now that the dust has had time to settle somewhat, five names seem to be emerging as the consistent front runners in the race to become the next head of Britain’s central bank, in the opinions of both the media and the bookies. While other articles have assessed these candidates in terms of their experience and communication skills, surprisingly little attention has been paid to their actual beliefs and prior decisions as monetary policymakers, which will likely be far more significant to the impact they might have on the British economy, if and when they assume the governorship of the Bank.

Before listing the five most likely candidates, however, two brief mentions should go to Sharon White and Shriti Vadera, neither of whom are necessarily in the very top echelon of potential candidates, but both of whom have featured too prominently in discussions of the Governorship to be dismissed from consideration entirely. Both suffer from certain disadvantages: White’s most prominent prior position has been as chief executive of the media regulator Ofcom, a field unrelated to monetary policy, although she did previously work for the Treasury; Vadera, the chair of Santander UK, may be disadvantaged by her “fiery” management style and strong partisan links to the Labour Party. However, the British government has repeatedly emphasised its commitment to diversity as one of the key aims of this hiring process, so the status of both of these candidates as “women of colour” keeps them very much in the race.

Andrew Bailey, 60, CEO of the Financial Conduct Authority

The person widely regarded as the favourite to replace Mark Carney is perennial Bank of England insider Andrew Bailey. Currently the head of Britain’s most powerful banking regulator, the Financial Conduct Authority, Mr. Bailey had previously held a number of different major roles at the Bank of England, including Deputy Governor (2013–16) and Chief Cashier (2004—11).

Having never been a member of the Bank’s rate-setting Monetary Policy Committee, Mr. Bailey has left little record of his votes or opinions on interest rate policy. However, one of his key reforms as head of the FCA was to crack down on the supposedly ‘unfair’ high rates being charged on consumer loans by high street banks, rent-to-buy consumer goods retailers, and other small lenders.

As a relatively low-profile insider, with extensive knowledge of the Bank and the British economy, Bailey is the obvious ‘safe pair of hands’ choice to see the British economy through the current uncertainty surrounding Brexit, presumably without significantly altering the Bank’s current cautious stance.

Raghuram Rajan, 56, former Governor of the Reserve Bank of India

Far from being another low-profile insider like Bailey, the second most favoured candidate, Raghuram Rajan, could more accurately be described as something of an international superstar in the world of central banking. Currently a Professor of Finance at the University of Chicago, Rajan served as Governor of India’s central bank from 2013 until 2016, before which he had been Chief Economist of the IMF (2003–7).

It was during his tenure at the IMF that Rajan made a name for himself by warning of instability in the financial sector as early as 2005, for which he gained considerable prestige once the housing bubble finally did burst. Unfortunately, his assessment of the actual causes of the financial crisis is somewhat less impressive; in his lauded 2010 book Fault Lines he attributed the 2008 crash to American income inequality and trade deficits, amongst other factors.

During the early part of his term as Governor of the Reserve Bank of India, Rajan raised rates to relatively high levels in order to reduce inflation, which fell from 9.8% when he entered office to 3.8% less than two years later; a relatively good record by the standards of post-2008 central bankers.

However, if Mr. Rajan did become the next Governor of the Bank of England he would be only the second non-British holder of that office, coming immediately after the Canadian Mark Carney. In light of the fragile state of the UK economy at present, not to mention the negative reception which has been afforded to many of Carney’s pronouncements on Brexit, it is likely that Rajan’s chances of becoming the Governor would be significantly hindered by his status as a foreigner, rather than an insider already deeply familiar with the UK economy.

Dame Nemat Shafik, 57, Director of the London School of Economics

In third place, according to the bookies, is current LSE Director and former Bank of England Deputy Governor Nemat Shafik, sometimes referred to as Minouche Shafik. In contrast with the disadvantage Rajan might suffer due to his status as a foreigner, Shafik arguably stands to benefit the most from her background out of any of the likely candidates. When announcing the start of the search for the next BoE Governor, the UK government revealed that it would employ Sapphire Partners, “a head-hunting firm that specialises in diversity and placing women in top roles.” As an Egyptian-born woman of colour, Shafik’s appointment would certainly fulfill the government’s diversity requirements, while her background in Britain (LSE and Oxford educated, joint UK-US citizenship) would likely save her from accusations of being insufficiently familiar with the UK economy.

During her time as a Deputy Governor, Shafik sat on the Bank’s rate-setting Monetary Policy Committee from mid-2014 to early-2017, which makes her the highest-ranking candidate (according to the bookies) with actual hands-on experience of the Bank of England’s most important function. Over the course of the 29 meetings of the MPC at which Shafik was present, she overwhelmingly voted with the rest of the MPC on interest rates, voting 28 times to maintain rates at their then-current levels, and once voting to decrease rates at the August 2016 MPC meeting when it was unanimously decided to cut rates to 0.25% in the aftermath of the referendum to leave the European Union. Shafik never voted to increase interest rates. This habit of voting with the herd during her time at the Bank offers little insight into her views on monetary policy, or what approach she might take with interest rates if she were to become Governor. A safe assumption, however, would be that she might favour a cautious continuation of current expansionary policy over a potentially painful but necessary raising of rates.

Sir David Ramsden, 55, Head of the Government Economic Service

Following Shafik in the betting odds is life-long civil servant Dave Ramsden, perhaps best known as the man who personally persuaded Prime Minister Tony Blair that Britain should not join the euro, in 2003. Ramsden has held a range of senior positions in the government’s economic bureaucracy over the past three decades, including Chief Economic Adviser to the Treasury, and Director-General of the Department for Business, Innovation and Skills. He is currently head of the Government Economic Service, which is responsible for hiring and assigning economists across all central government departments. According to the Guardian, Ramsden “is known to value a range of opinions and has spoken in favour of a more pluralist approach to the way universities teach economics,” potentially promising characteristics for a Bank of England Governor.

Ramsden has also been one of the Bank of England’s Deputy Governors since 2017, giving him a seat on the nine-person Monetary Policy Committee. During that time, Ramsden has demonstrated a very cautious approach to interest rates; over the course of the 15 MPC meetings at which he has been present, Ramsden voted to maintain rates 14 times, even when other members of the MPC were voting to increase rates. The only occasion on which he did not vote to maintain rates was the August 2018 meeting when it was unanimously decided to increase the Bank rate to 0.75%, its highest level since 2009. These votes to keep rates low indicate that Ramsden would likely not affect any significant change in the Bank’s current long-term policy of gradually ‘normalising’ interest rates, and might even further slow the already glacial progress toward higher rates.

Ben Broadbent, 54, Deputy Governor for Monetary Policy at the Bank of England

Finally, Ben Broadbent has featured relatively consistently in the top echelon of potential candidates for next Governor of the Bank. Broadbent built his career first at the Treasury and then, like Carney, at Goldman Sachs, before becoming a Deputy Governor of the Bank of England in 2014. Although Broadbent is an internationally recognised monetary economist, he faces several obstacles to becoming the next BoE Governor, and it is unclear whether he even wants the role. He seems to be regarded as more of an aloof technocrat than a dynamic leader, and gained a reputation for making what the media euphemistically dubbed “communication errors” after he referred to the British economy as “menopausal” last year, in the sense of being “past [its] peak and no longer so potent.” Broadbent was forced to apologise for these remarks after the uproar they predictably caused, and has been maintaining a relatively low profile since.

Having been on the Monetary Policy Committee since June 2011, Broadbent has by far the most experience as a Bank of England monetary policymaker out of any of the candidates on this list. Over the course of the 86 meetings of the MPC at which Broadbent has been present, he has voted 83 times to maintain interest rates at the same level, twice to increase rates, and only once to decrease them, in response to the Brexit referendum. This paints a generally cautious, even dovish, picture of his stance on interest rates. However, it is worth noting that one of the two occasions on which Broadbent voted to increase rates was the November 2017 meeting of the MPC, when no unanimous decision could be reached and certain members were calling for rates to be maintained, suggesting that Broadbent is at least not a perma-dove.


George Pickering

George Pickering is a postgraduate student of Economic History at Oxford, and has twice been a Fellow in Residence at the Mises Institute.

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