MARK CARNEY, the incoming governor of the Bank of England, will devalue the pound to help reverse the UK's sluggish growth, the world's biggest bond fund has predicted.
Mike Amey, head of sterling portfolios at Pimco, said Carney could attempt to depreciate sterling by as much as 15 per cent as he seeks to help British exporters tap into foreign demand, The Times notes. Such a move will help Britain to recover from its "worst recession in 50 years".
Speaking at a London briefing, Amey said that domestically-driven growth in Britain will be "relatively subdued" as the private sector continues to pay off its debts over the coming years, leaving Carney with just one option: "He is clearly not going to state this upfront, but he is going to try and keep sterling from going up, and probably he is going to want to see it go lower."
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Between 2007-2009 sterling was devalued by 25 per cent – but the decline failed to deliver the boost in exports the Bank of England and Treasury had expected, partially due to the continued slump in the eurozone, on which Britain is heavily reliant for exports.
In mid-March the Bank's outgoing governor Sir Mervyn King tried to halt the decline, saying the Bank was "certainly not looking to push sterling down". But Amey said under Carney the pound could end up at its 2009 low of $1.37 against the dollar.
Canadian Carney, who takes over from King in July, recently said that of all the countries in the G7 only Canada does not need "to repair". He will be paid £800,000 a year in the hope he can have a similar effect on Britain's economy. He faces high expectations – as Reuters notes, the British press "have alluded to him as a sort of rock star".
