Canadian-born Bank of England wades into the Brexit fray

The hits keep coming for Canadian-born Bank of England governor Mark Carney, who threw himself into the debate surrounding Britain’s referendum on leaving the European Union earlier this month by warning that Brexit could possibly lead to a “technical recession.”

Now, after stark criticism from Vote Leave supporters, including Jacob Rees-Mogg – a Tory MP and Treasury Select Committee member – calling on Carney to resign for entering a political discussion, the central bank head has shot back saying the BoE has a “responsibility to discharge our remit and we have a wider responsibility to the British people, who don’t want risks kept from them.”

Carney, former governor of the Bank of Canada, went on to point out that the BoE’s remit was to deliver “low, stable, predictable inflation.”

“It may be inconvenient for you,” he told Rees-Mogg. “But we have made it more likely that we will bring inflation back to target, whatever the outcome of the referendum, sooner and more sustainably, and that will be a better economic outcome.”

Brian Lee Crowley, managing director of the Ottawa-based Macdonald-Laurier Institute, a national public policy think tank, says despite the Vote Leave campaign’s chagrin, speaking up is Carney’s job.

“One of the roles of the Bank of England is to be an independent voice, independent of government, of the political parties, speaking out about the risks that face the British economy,” says Crowley.

But what’s unusual, explains the economist, is that the risks to the British economy in this case are internal and generated by political debate.

“That doesn’t put them off limits for him, this is no different from Carney talking about the risk of the British economy poised by Greek default or the Chinese economy overheating – these are things he has talked about quite properly and he is guided in his comments on economic uncertainty by a policy council,” says Crowley. “And it is the view of that council that the biggest risk facing the British economy in the next little while is the referendum on remaining within the EU.”

He points out that it’s entirely possible to consider it a risk to leave but still be in favour of it, but Crowley suspects a lot of the dust up comes from the fact that “those in favour of leaving the EU don’t like to be called to account by an independent credible voice.”

In fact, Carney’s outward-facing comments aren’t entirely out of character. The governor stepped into the Scotland Referendum fray last year, noting that given the size of Scotland and its role in the economy, leaving wouldn’t pose a systemic risk to the rest of England. But he did point out that an independent Scotland couldn’t use the pound.

“Remember that the role of the Bank of England is to comment clearly and unabashedly and unapologetically about risks to the national economy,” says Crowley. “Mark has really pulled his punches in the sense that if the bank spoke about other risks facing the British economy, these external risks that I’ve talked about, they would talk about seriousness and (put) numbers on it.”

Carney avoided sizing up the risks. But in this case, Crowley says he “wouldn’t be surprised” if we hear more from the BoE head.

“We’ve got over three weeks left in the campaign, I think he will come under considerable pressure to say more because people are very interested in what the Bank of England’s assessment of the risks (are),” says Crowley. “There’s no benefit to the UK in Mark Carney, head of the Bank of England remaining silent on what is an obvious risk to the British economy… it would harm his credibility.”