fA safe pair of hands for the government whipping boy, Andrew Bailey has certainly been on a rollercoaster ride as Governor of the Bank of England since he was appointed just over two years ago.
Bailey got the keys to Threadneedle Street from Mark Carney just as the first Covid-19 wave hit the global economy. Since then, it’s been one nasty shock after another for the man long tipped for the bank’s top job.
The lockdown in the spring of 2020 meant Bailey – a Leicester native – spent a lonely first few months in the governor’s room, with all but a handful of Bank staff working from home.
It wasn’t long before he was accused of making missteps.
Bailey dropped his predecessor’s policy of providing “progressive guidelines” to financial markets, but was accused by investors of failing to create a framework for decision-making similar to that of the US Federal Reserve and European Central Bank.
When inflation started to rise in late 2021, Bailey ran into even more trouble. He said workers should limit their wage demands to help reduce inflation. Unions weren’t the only critics of a message that seemed disconnected from the day-to-day worries of low- and middle-income workers.
But it is the aftermath of the pandemic that has increased the pressure on the 63-year-old. It is the Bank’s job to meet the government’s target of 2% inflation. That has proved increasingly difficult, first due to bottlenecks in global supply and now due to skyrocketing energy prices resulting from the Russian invasion of Ukraine.
Bailey’s predecessor, Carney, had a reputation for being something of a martinet, unlike Eddie George, governor when the Bank gained independence from Labor after the 1997 election. Bailey, George’s bag carrier at the time, has a more consensual laid-back style.
He may even be a little too laid back for his critics, who accused Bailey of sleeping behind the wheel as inflation hits levels not seen in four decades and the economy heads into a five-quarter recession. A football manager presiding over similar results would head for the exit, but Bailey, a West Bromwich Albion supporter, looks safer.
He is not the first governor to get in trouble with the government. Chancellor Alistair Darling during the global financial crisis was seriously considering not to reappoint Mervyn King for a second term.
But unlike King, Bailey has a fixed eight-year term and plans to figure it out. If Liz Truss or Rishi Sunak want to get rid of him, they will have to take the very risky step of firing him.
Even that seems possible at a time when so many high-ranking conservatives seem to attack political, judicial and financial institutions when they give the government a hard time.
It’s been five and a half years since the Daily Mail headlined ‘Enemies of the People’ to describe Supreme Court justices who agreed that the government needed parliament’s consent to announce Brexit.
Iain Duncan Smith and Jacob Rees-Mogg joined the judge, accusing them of going too far. Both are expected to be placed in a Truss box.
Truss was the justice minister at the time, and after much delay, she released a statement reaffirming the independence of the judiciary.
Bailey must hope that if Truss becomes prime minister, she will be as softened as the bank’s independence is questioned.