Speaking at the World Economic Forum in Davos over the weekend, incoming Governor of the Bank of England, Mark Carney, said he will be putting growth at the heart of his approach to the job and is willing to see higher inflation for longer in order to support the economy.
Mr Carney hinted strongly at a new approach during his speech, when he said that central bankers should be prepared to take aggressive measures to help economies achieve what he called an “escape velocity”.
He added that these include the use of unconventional measures and he would suggest keeping interest rates lower for longer while considering further quantitative easing, which is the indirect provision of monetary stimulus via the financial system.
Although he was speaking generally rather than specifically about the UK, Mr Carney’s comments will be seen as evidence that he is preparing a substantial change of direction when he takes up his new post this summer.
While suggesting that he might act quickly, perhaps with a pledge to hold interest rates low for a prolonged period, he said: “Monetary policy can be more nimble than fiscal policy.”
Meanwhile, the atmosphere at Davos on the final day was guardedly optimistic, as the collapse of the Euro now looks much less likely, while a hard landing in China, or debt crisis in the US, also look more distant.
The optimism has translated to the stock markets especially in the US, with the S&P 500 closing above 1,500 points on Friday for the first time since 2007,and the FT’s “all-world” index is the highest it has been in 20 months.
There was also that good news from the European Central Bank this week, as it announced that a large proportion of the emergency lending it had offered to European banks just over a year ago was being repaid early.