At the end of 2019, Andrew Bailey was confirmed as the next Governor of the Bank of England. Currently Chief Executive of the Financial Conduct Authority, Andrew Bailey has previously been Deputy Governor at the Bank of England as well as Head of its Prudential Regulation Division.
The current Governor, Mark Carney will see his term extended for a third time, albeit by a shorter extended period, from 31 January to 15 March 2020.
Andrew Bailey will start his eight-year term on 16 March 2020, ahead of his first monetary policy meeting on 26 March 2020. This leaves Mark Carney with one more meeting as Governor on 30 January 2020, one day before the UK legally secedes from the European Union.
The view from Brooks Macdonald
Andrew Bailey will be taking the reins at a crucial juncture for UK risk assets. The last two meetings of the Bank of England’s monetary policy committee held last November and December (2019) both saw a split vote of 7-2, the first such splits since June 2018, with the two votes calling for a 25bp cut in the UK policy interest rate from 0.75% presently.
Given the current weakness in UK economic growth, with rolling three-month UK GDP showing no growth in October, Andrew Bailey will be expected to support the recent tilt by Mark Carney to a more balanced interest rate outlook, especially given the Bank’s recent moderation in its growth and inflation forecasts in November.
UK risk assets have been cheered by the December UK general election result and the certainty that a landslide Conservative majority gave to support the UK secession from the EU by 31 January 2020. But while PM Boris Johnson will claim success for his ‘get Brexit done’ mantra, we think Brexit will continue to dominate markets and sterling in particular for some time yet.
There is a limit to how much monetary policy can insulate against the risks of the UK leaving the EU on WTO terms on 31 December 2020, but that will not stop markets and politicians alike pressuring the new Bank of England governor to maintain an accommodative bias, especially ahead of an expected fiscally expansive Chancellor’s budget due next month.
The views above are those expressed by Brooks Macdonald only and are based on their current understanding of the markets (December 2019). Past performance is not a reliable indicator of future results. Investment may not be suitable for everybody and potential investors should take their own independent advice.
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