Could Mark Carney learn a thing or two from Luis Suarez?

June 26, 2014

Bank of England Governor Mark Carney smiles as he waits deliver a public speech "One Mission. One Bank. Promoting the good of the people of the United Kingdom" at the Cass Business School in London, March 18, 2014. REUTERS/Sang Tan/Pool

Uruguay's Luis Suarez (R) reacts after clashing with Italy's Giorgio Chiellini during their 2014 World Cup Group D soccer match at the Dunas arena in Natal June 24, 2014.  REUTERS/Tony Gentile

 

 

 

 

 

 

 

In the aftermath of Liverpool and Uruguay footballer Luis Suarez biting an opponent yet again, and with such aggression that he scarred the player’s arm and hurt his own teeth, FIFA has banned him for nine games, and psychologists are trying to justify his behaviour by saying that Suarez must have been humiliated and frustrated in his youth. I, in contrast, am asking whether Mark Carney and co. should learn to be a little more like Suarez?

Let me make this clear, I am not advocating that members of the Bank of England’s Monetary Policy Committee give each other a good bite if they disagree on policy (imagine the bite marks at the ECB if that was socially acceptable), but they should metaphorically pull a few Suarez’s from time to time.

Earlier this week was a classic example. Mark Carney was testifying to parliament on the May Inflation Report. A mere two weeks before, Carney had been rather candid at the annual Mansion House dinner, and stated that the markets were mis-pricing the potential for a rate hike. This triggered a huge market reaction, pushing GBP-USD to its highest level for 5 years. Interest rate traders wasted no time shifting their expectations for a rate rise from Q2 2015 to January 2015.

Carney would have known that his Mansion House comments would be widely reported in the press, yet, he changed his tune when he was speaking to the politicians. Rather than play up the prospect of a rate hike, as he had done a couple of weeks’ before, he talked down the chance of one, saying that his comments at Mansion House were his own personal views, and that wages were too low to hike rates.

Ok, so it should be no surprise that an ex-Goldman Sachs banker who studied economics flips his view every 5 minutes. However, when you are head of the one of the world’s most important central banks you need to keep your message clear. The markets are so large, they move so quickly, that if you change your tone as often as you change your shirt you risk losing your credibility.

The BOE Governor needs to start thinking about this. Less than a year ago he advocated dovish forward guidance, hinting that a rate rise would not be in store until late 2016. However, he had to ditch that view after the economy picked up strongly in the second half of 2013. Fair enough, but now that the economy has beaten BoE forecasts and he seemed to do the sensible thing and suggest that rates should rise reasonably soon, he can’t start to back-track the minute a politician questions his judgement.

This is where Luis Suarez comes in: Mark Carney needs more bite. He might look good in front of the cameras (for central banker standards anyway), but it’s not his looks we care about. The UK needs a central banker who has a good reputation. If he loses his credibility then so do we. Right now Carney has more bark than bite. It’s time for him to show his teeth and stick to his convictions. If rates need to rise, then tell it straight. He could win some fans, especially among the country’s beleaguered savers.

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