England, the third largest economy entity in the euro zone, is facing difficulties on its way to economic recovery and is seeking help from a Canadian governor. Taking the term from Sir Mervyn King, Mark Carney became the new governor of the Bank of England (BE) with hopes of bringing a breath of fresh air to the British economy. Before entering Carney’s time in charge, let’s take a glance at the British economy and predict the future trends under Carney’s lead.
As we all know, the euro zone’s economy has struggled dramatically since the global financial crisis and England was struck hard by these economic woes without doubt. Although the government has came up with series of budget deficit policies, Britain’s recovery is still stalling as it exports are threatened by an economic downturn among Britain’s European trading partners. Other than that, inflation is another bomb hitting Britain’s economy. The inflation rate is stuck above the central bank’s 2 percent target for a long time and is expecting to hit 3.1 percent this summer due to a weaker pound. This obviously will make imports more expensive and decrease people’s spending. Although exports are struggling and the inflation rate is relatively high, gross domestic product grew 0.3 percent in the first quarter of this year after shrinking during the previous three months. The Bank of England has predeicted that growth will accelerate to 0.5 percent in the second quarter.
Carney, described as the best central banker in the world, took charge of BE under such a high expectation and challenge. The bank's main task is now to keep 12-month British inflation close to a government-set target of 2.0 percent. Carney has suggested that economic output might be a better measure for the central bank, with British inflation struggling during King's watch to stay consistently close to the target. However, it seems that Carney is facing a tough task over stimulus policy. Quantitative easing helps to keep interest rates low but many analysts argue that it also pushes up inflation.
I think that the main job for Carney is to add more stimulus to UK economy and speed up its recovery. Obviously, market expectations around Carney’s arrival are extremely high. Do you think Carney will lead England into economic prosperity again?