Carney in nowhere land

The Bank of england was onto a hiding to nothing by holding its final Monetary Policy Report event of the year at the start of a General election campaign and with Brexit still unresolved.

Adding to the layers of uncertainty, no one can be entirely sure whether governor Mark Carney will still be at the tiller when the next report is published.

Reading between his lines, it sounded as if he would serve beyond a departure date of January 31 if asked.

That may not be required if there is a clear outcome to the election. One would then expect his successor to be unveiled quickly so as to give the markets certainty.

But a hung Parliament, or another minority government, would scupper chances of an early decision.

Two external members of the interest rate setting monetary policy committee, Michael Saunders and Imperial College economist Jonathan haskel, showed their concerns about the direction of the economy by backing an interest rate cut.

The Bank’s forecasts for lower growth than previously expected over the next three years are based around world conditions as much as Brexit. The slowing global economy, from europe to Latin America, the trade dispute between the US and China, together with Boris Johnson’s more frictional deal with Brussels are all reasons for leaning towards monetary easing.

Bank forecasters have cut expansion of the economy by 1pc over the next three years. Nevertheless, they see output growing by 1.4pc this year, rising to 2pc by 2022.

The view at the Bank is that already announced fiscal expansion (the Chancellor Sajid Javid wants to pump 4.1pc more spending into the economy in 2020-21) should add up to 0.4pc to output over the coming period. What complicates the picture is that this may just be the start of something far more transforming on the fiscal front. Labour has added a cool £400bn to its spending plans and Javid has torn up fiscal rules to give the Tories more flexibility to spend and borrow.

Looser fiscal policy would discourage easier monetary policy unless the world was staring at a global recession.

The Bank of england and other central banks were too slow to ease monetary policy ahead of the Great Recession of a decade ago.

But a UK bank rate of 0.75pc can hardly be described as harsh.

Indeed, looking across the channel at negative rates in europe, and the problems created for the whole financial system there, is good reason to be cautious about cuts.

If Labour were to be elected, one would expect disorderly markets and government stock prices to tumble given the scale of fiscal loosening and bond issues.

The first task of the next governor might be to raise rates in the hope of stemming capital flight.

Doing the splits

IN The choice of Simon Dingemans as chairman of audit enforcer the Financial Reporting Council, the Government reached beyond the comfort zone of City grandees.

Dingemans has served time as head of mergers and acquisitions at Goldman Sachs and finance director of GSK, so he has seen audit from the other side of the fence. In an FT interview, he goes far further than the Competition and Markets Authority by calling for a break up of big accountancy firms into audit and consultancy arms.

It is clear that the Chinese walls between the two functions simply don’t work.

Indeed, it goes well beyond that. The cosiness between audit firms, which often advise on directors pay, is among the reasons why remuneration and governance has gone haywire.

Former stock exchange boss Sir Donald Brydon, who is reviewing audit reform proposals, is thought to be equally robust in his views. The door could be closing on free lunches for the big four.

Mushy Pease

WhILe on the subject of grandees, one has to question the judgement of the Jupiter board in choosing Nicola Pease as chairman.

Much of the criticism stems from her marriage to hedge fund trader Crispin Odey who has been accused of betting against Britain. Truth is that hedge funds play an important role in price formation in uncertain times. The real case against Pease was her failure to do anything to halt the implosion at Northern Rock in 2007-08 when she was a non-executive at the failed bank.

Investors in funds post Woodford need backbone, not group think.