Raghuram Rajan is a serious contender for Bank of England top job

by Amit Roy

AFTER Mark Carney who is Canadian, will the next governor of the Bank of England (BoE) also be a foreigner?

Somehow, I don't think the chancellor of the exchequer, Philip Hammond, who will make the appointment, will take such a risk. And yet, the Financial Times (FT) reckons Raghuram Rajan, the 56-year-old former governor of the Reserve Bank of India who has returned to his previous life as a professor at the Booth Business School at Chicago University, is a serious contender.

So is Baroness Shriti Vadera, who served as a "no-nonsense" treasury minister under Gordon Brown and is currently chairman of Santander UK. The FT described the job as the most powerful appointed position in British public life" but it is also something of a poisoned chalice.

Every time Carney warned of the economic consequences of a hard Brexit, he was subjected to virulent abuse by Brextremists. For example, Tory MP Jacob Rees-Mogg called Carney a `second-tier Canadian politician" who "failed" to get a job at home.

Last weekend's The Big Read slot in the FT said that after having his term extended twice, 54-year-old Carney will definitely stand down at the end of January 2020: His replacement will be announced in October this year.

“If the bookies are any guide, Andrew Bailey, chief executive of the Financial Conduct Authority, is the favourite, but his odds are drifting out a little, while Raghuram Rajan, the urbane Chicago economics professor and former governor of the Reserve Bank of India, is running him a close second," the paper revealed.

This prompted an FT reader, Tim Young, to argue Rajan would be a better bet than Bailey: “The difference in character between Raghuram Rajan and Andrew Bailey is exemplified by their attitude to criticism of US central bank policy during pre-financial-crisis boom. Rajan was famously critical of the US boom, and by implication Federal Reserve policy, in a 2005 Jackson Hole speech, at a time when the boom was popular. Andrew Bailey, by contrast, where such concerns did exist inside the BoE, adhered to the convention that central banks do not criticise each other in public.

“If he wants a safe pair of hands who will try to steer the BoE clear of controversy, the chancellor might prefer Andrew Bailey. If the chancellor wants a more rigorous, questioning figure who might shake up the BoE groupthink, he might prefer Raghuram Rajan, especially if, at the time the decision needs to be made, it looks like the Tories might lose the next general election to labour, in which case, Rajan's spell at the Reserve Bank of India suggests that he might resist some of labour's more fanciful ideas of what the BoE can be mandated to achieve."

India's prime minister Narendra Modi may have done Rajan a favour by forcing him to resign before he could be considered for a second term heading the Reserve Bank of India.

The Guardian, which like the Daily Telegraph, also included Rajan and Vadera among the serious candidates to replace Carney, said Rajan's stint at the Reserve Bank of India had "added to his reputation as a credible, independent-minded economist".

Rajan has indicated he is happy where he is. If nothing, the current speculation will be good for his CV. Also, he has got a new book out - The Third Pillar: How Markets and the State Leave the Community Behind.