Bank of England boss Mark Carney has left behind a “poisoned chalice” for his successor as the Governor’s role has become too politicised, a former interest rate-setter has warned.
David “Danny” Blanchflower – who sat on the Bank’s Monetary Policy Committee (MPC) from June 2006 to June 2009 – told the Press Association Chancellor Philip Hammond will struggle to find candidates to replace Mr Carney when he leaves next January.
He said: “Who would take over from Carney? Who in their right mind would take this poisoned chalice?”
The British-born economist, who moved to the US in 1989, said Mr Carney and the MPC have become “highly politicised” since the referendum vote to quit the EU.
The Governor and the MPC have come under heavy criticism over their handling of communications surrounding Brexit – in particular the Bank’s doomsday scenario report on Brexit, which led to accusations of collusion with the Government and “implausible” forecasts.
Mr Blanchflower said American economists cannot believe “how politicised the MPC has become”.
“Because politics intrudes on all of this, that’s an impossible job to be on the MPC,” he said.
“It’s a pretty tough place to be on the MPC right now.”
His comments come as Mr Hammond prepares to revive plans to recruit a successor for Mr Carney this year, after persuading the central bank to extend his term by an extra seven months to help ease disruption from Brexit at a critical time.
It marked the second extension, after Mr Carney said in 2016 he would stay for an extra year, originally until June 2018, following the end of his five-year term.
But his tenure has been marred over the past two years, with the Brexit scenario analysis the latest to provoke a vicious backlash.
Another former MPC member, Andrew Sentance, recently told MPs the report was “extreme” and “implausible” and called into question the Bank’s independence from the Government under Mr Carney’s reign.
Mr Carney has also faced criticism over his attempts at so-called forward guidance on rates, with the Governor earning himself the nickname of the “unreliable boyfriend” after bracing borrowers and financial markets for hikes that did not come to pass.
The Bank eventually raised rates to 0.75% last August, but some critics believe policymakers missed several opportunities to hike rates to more normal levels in the run-up to the EU referendum.
Mr Blanchflower – who was awarded a CBE in 2009 for his services to the industry – recently warned that interest rates might have to be slashed into negative territory for the first time in history to combat the fallout from a chaotic no-deal Brexit.
He told the Press Association the Bank had “very few arrows in the quiver” to contain potential economic turmoil from Brexit.