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Future BoE governor Mark Carney defends pay package Future BoE chief Mark Carney sees 'merit' in policy debate
(about 1 hour later)
The future governor of the Bank of England (BoE), Mark Carney, has been forced to defend his pay arrangements to members of the House of Commons' Treasury Committee. The future governor of the Bank of England (BoE), Mark Carney, has not ruled out changes to the way the bank runs monetary policy.
Mr Carney, who is currently the governor of the Bank of Canada, will be paid a total of more than £800,000 a year. Speaking to members of the House of Commons' Treasury Committee, Mr Carney said there was "merit" in discussing the bank's monetary policy framework.
That is despite a recent pay freeze introduced for BoE staff. But he said the current policy of inflation targeting had been the most successful.
He is due to take over from the current governor Sir Mervyn King in July. Mr Carney will take over as BoE governor in July.
He is currently the governor of the Bank of Canada.
He said targeting inflation had proved successful in both the UK and Canada, setting a "high bar" for any alternative policy.
The current remit of the BoE is to target inflation of 2%.
Since the economic crisis began in 2008 the bank has kept interest rates at historic lows and implemented quantitative easing to inject £375bn of liquidity into the financial markets.
Mr Carney stressed that any changes to the bank's remit would be a decision for the chancellor and the government, but said "there is merit in debating the framework in Britain and coming to relatively quick conclusion on it".
'Full stimulus needed'
He said he had been involved in some high level discussions about alternatives to the bank's remit since delivering a speech in December in which he discussed targeting nominal GDP - a measure that takes into account inflation and growth.
But he said the discussions had not been detailed.
Mr Carney, who is still six months away from taking the reins at the BoE, would not commit to taking specific measures to boost economic growth, but said it was clear "full monetary stimulus" was required to help the economy.
"If more is required once I'm in office, I will do my best to persuade my colleagues [of that]," he said.
Both the Chancellor George Osborne and current governor Sir Mervyn King have suggested the bank could do more.
On Wednesday, Mr Osborne said the BoE should complement the government's deficit reduction strategy with monetary policy that "should continue to support the economy".
Pay deal defended
Before answering questions on monetary policy, Mr Carney was forced to defend the pay deal he has agreed for his five-year term as governor.
Mr Carney's remuneration includes a salary of £480,000, plus an annual pension allowance of £144,000 and a housing allowance of £250,000.Mr Carney's remuneration includes a salary of £480,000, plus an annual pension allowance of £144,000 and a housing allowance of £250,000.
Speaking in front of the committee, he defended the housing allowance, arguing that such arrangements were "common" for executives moving to London, which he characterised as "one of the most expensive capital cities in the world". He defended the housing allowance, arguing that such arrangements were "common" for executives moving to London, which he characterised as "one of the most expensive capital cities in the world".
His current home of Ottawa, he noted, was one of the cheapest.His current home of Ottawa, he noted, was one of the cheapest.
Mr Carney also said his scheduled five-year term as governor would be enough to ensure the "relaunch" of the bank, which is taking on additional responsibility for banking regulation and financial stability, along with monetary policy.Mr Carney also said his scheduled five-year term as governor would be enough to ensure the "relaunch" of the bank, which is taking on additional responsibility for banking regulation and financial stability, along with monetary policy.
Previous governors have served for eight-year terms, but Mr Carney was offered a shorter term after he initially decided not to apply for the job.Previous governors have served for eight-year terms, but Mr Carney was offered a shorter term after he initially decided not to apply for the job.
Inflation targeting 'successful'
Answering questions on monetary policy, Mr Carney said the bank's current framework of "flexible inflation targeting" was the most successful policy framework so far implemented by central banks, but he did not rule out alternatives.
In a written submission to the committee, he said: "I have not made an assessment of the merits of altering the monetary policy framework in the UK... I do think, however, that it is important that the policy framework is reviewed periodically."
Mr Carney is also likely to be quizzed on what the Bank can do to boost the UK's economic growth.
Both the Chancellor George Osborne and current governor Sir Mervyn King have suggested the bank could do more.
On Wednesday, Mr Osborne said the BoE should complement the government's deficit reduction strategy with monetary policy that "should continue to support the economy".
The UK has suffered from recessionary periods and low growth since 2008, and the bank has responded by keeping interest rates at historic lows and enacting a programme of quantitative easing.
That has involved pumping £375bn into the financial markets in an attempt to stimulate the economy.