The Bank of England’s incoming governor Mark Carney has said he will not be an 'emperor' and hinted he may tinker with the inflation target when he takes office.
In a grilling by the Treasury Select Committee, Carney, who replaces Mervyn King on 1 July, said: 'As governor I will from time to time be in the minority. That is fine. My job is to ensure all views are heard. It will not always be possible to have consensus on the Bank of Engalnd's MPC and FPC...I would like to be on the right side more often than not. I fully imagine during the course of my term I will be outvoted.'
Carney, who provided 45 pages of written evidence to support his philosophy, added: 'I hesitate as a foreigner coming in and suggesting changes to the longer traditions of the [Bank of England]. Others should make those judgments rather than me.'
When asked if the 2% inflation target was 'too flexible' Carney said he did not think this was necessarily the case but indicated more clarity is needed:
'In these exceptional economic circumstances, with inflation above target, it would be useful to have a shared understanding of what is the optimal timeline to return [to the target] and why. There is merit to considering the Fed-style threshold-based guidance,' Carney said.
He added: 'The flexible inflation-targeting framework should remain broadly in place, but details need to be reviewed and could be changed.
'In Canada we review our framework every five years. We have found that is an effective process. It ensures shared understanding about the "flexible" word in "flexible inflation targeting". 'In an exceptional environment, it is important to ensure there is buy-in to the current framework.'
My pay is the same as King's
Carney also defended his pay package of nearly £1 million in front of the Treasury Select Committee saying he believes the sum is 'equivalent' to his predecessors.
MPs had asked him whether £874,000 pay package, which is three times that of King's, was ‘excessive’.
‘I was offered these terms and I accepted them,’ he said.
‘Since there is no pension associated with my package I’m advised by court that the package is equivalent to the current governor. The difference is the housing allowance,’ he said.
King was paid a base salary of £305,000 alongside a £300,000 pension allowance during his time as governor, while Carney is being paid £480,000 and a £250,000 housing allowance which is for accommodating his wife and four children during his tenure.
He added that the quarter of a million housing allowance is justifiable since he is moving to a country with one of the most expensive property markets in the world.
Carney also denied he has political ambitions, stating he would have moved in to politics in Canada if he had wanted to.
‘If I had political ambitions I would have pursued them in Canada. I think that is proof I do not have political ambitions.’