Carney has the unusual distinction, for a G7 central banker, of possessing a sensible and clearly defined strategy, boosting market confidence over the stability and transparency of monetary policy.
He is credited for his post-Lehman firefighting skills, sensible pace of subsequent monetary tightening and a flexible approach to an inflation-targeting mandate. It’s a testament to his market nous, leadership skills and success as a central bank governor that he leads the Financial Stability Forum, which is reshaping the face of global finance.
Carney has enjoyed his fair share of luck, thanks to high commodity prices, but the governor’s in-tray is now bulging: a ballooning of home equity credit lines and other personal debt growth affecting the banks and the Dutch disease effects of the commodity boom, which has driven up the currency, igniting the ire of exporters.
However, few criticize the governor for failing to strike a judicious policy mix, while his broader contributions on economic policy are appreciated even by his foes.
Central Reserve Bank of Peru governor, Julio Velarde
The governor is credited for his innovative use of reserve requirements, success in anchoring inflation – despite bouts of supply-side price instability – and cautious approach to reduce dollarization. Nevertheless, the central bank is struggling with FX appreciation, but analysts credit the governor for striking the right balance in its approach.
Guillermo Diaz , Peru economist at CAF, says: “The main contribution of the central bank to the economy is maintaining a stable and low inflation rate. The central bank is the public institution with the highest level of confidence. One example of that is, when the firms set their budgets or business plan for the next few years, they do not worry about the inflation rate, they simply assume 2%, thus anchoring expectations via wages. This behaviour reflects the high level of reputation that the central bank has."
Diaz adds: “In respect to the exchange rate, since the economy is partially dollarized, the foreign exchange market intervention by the central bank reduces exchange-rate risk. This policy is like an implicit exchange-rate insurance against high volatility. The central bank believes that the reduction of dollarization has to be voluntary and this is an adequate policy.”
Bank of Korea governor, Choongsoo Kim
Kyunghoon Kim, a research associate at SERI, sums up the sophistication and stability of South Korean monetary policy, both in interest-rate expectations and capital account management, in recent years: “The central bank's use of stimulus was timely. While it was sufficient in size at the time, more may be needed. Rather than taking action on inflows, the central bank has been focusing on stimulating the economy. Inflows aren’t the biggest problem the central bank has to face: low growth and declining exports are more serious.”
Ieisha Montgomery, associate international economist at Northern Trust, adds: “The central bank has done a good job of managing interest rates. Cutting rates in the face of global headwinds was the right call. The response to inflows has been acceptable. The quality of capital we’re seeing isn’t setting off any alarm bells, and the central bank did a good job of managing quality when these concerns were at their height.”