MNI INSIGHT: BOE’s Tenreyro, Bell In Frame To Succeed Haldane

Two current Bank of England officials – Monetary Policy Committee member Silvana Tenreyro and Director of Monetary Analysis James Bell - are understood to be the front-runners to succeed Chief Economist Andy Haldane, who is set to depart after the June MPC meeting, according to people familiar with the process.

If Tenreyro were to be appointed as chief economist it would leave the Treasury having to fill two external vacancies on the nine-member MPC, with Gertjan Vlieghe's second and final term ending on August 31. Karen Ward, Chief Markets Strategist EMEA at JP Morgan Asset Management, was one name that cropped up for one of the independent MPC positions in response to MNI inquiries.

External MPC appointments are made by the Chancellor of the Exchequer and Ward, who started her career providing analysis for the MPC before moving to HSBC for a decade, chaired former Chancellor Philip Hammond's Council of Economic Advisers.

The new chief economist will have deep questions to address. The high degree of uncertainty over the UK's inflationary outlook in the post-Covid recovery has been combined with the Bank undertaking a review of its tightening strategy, with searching questions about the full range of its policy toolbox that include the efficacy of quantitative easing and negative rates.

ACADEMIC LEANING

One view is that the Bank would prefer an academic to take over the role, someone who can drive the research agenda. That would tilt the scales internally towards Tenreyro, the Harvard-educated London School of Economics professor who last month, alongside her academic colleague Ricardo Reis, won the biennial Yrjo Jahnsson Award for research contributions to European economics.

Tenreyro has been prominent in setting out her views that negative interest rates work and that the Bank should be keep providing stimulus as a bridge over the pandemic's economic impact to when the economy fully re-opens. Changing her job title would therefore make no difference to the monetary policy balance on the committee.

On the other hand, Bell, who has spent the past 23 years at the Bank, is heavily involved in the quarterly forecast round without ever having to make an individual judgement on the outlook and would be expected to start with views closer to the committee's centre of gravity. But while Bell is highly regarded as a policy communicator, he is thought to lack the stellar academic CV of other names being advanced.

Among these is Reis, though he would be coming in from the outside and there is no suggestion that he is actively seeking the post. He has worked with Bank economists on the effectiveness of currency swap lines and has also researched QE and central bank balance sheets, central to questions over unwinding asset purchases and concerns over QE's role as the default option for providing liquidity in stressed markets.

Another economist thought to have the right background is Huw Pill. Now at Harvard. Pill formerly spearheaded Goldman Sachs' European economics team and previously worked at the European Central Bank, where he rose to be deputy director general research.

Gareth Ramsay is a further BOE insider with the seniority to do the job is, having variously held the post of director of communications, monetary analysis and currently data and analytics.

BUSINESS OR MARKETS?

On the external side, where the Treasury leads the selection process in consultation with the Bank, an important question is whether the specific skill sets of the outgoing Vlieghe will be emphasised. Vlieghe, who has worked as a Bank economist, a fixed income analyst and hedge fund partner in the City, has linked market expertise with academic research.

If the Treasury takes the view that his skills can be replicated across the Bank, one suggestion is that it could opt for an economist from a business background the business side.

There is a well-worn route from the CBI to the MPC, putting the industry lobby group's current chief economist Rain Newton-Smith in the frame, where she would be following in the steps of her predecessors Ian McCafferty and Andrew Sentance. Newton-Smith, by background, has already spent nine years at the Bank and a spell at the IMF, underscoring how cosmetic any labelling of her as a 'business economist' would be.