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By David Milliken
LONDON, Oct 8 (Reuters) - British finance minister PhilipHammond has appointed HSBC's chief European economist,Karen Ward, to advise him as the country prepares to leave theEuropean Union, the finance ministry said on Saturday.
Ward's new role as economic special advisor is aninfluential backroom position in British politics at a time whenHammond is considering how much to cushion the economic shock ofJune's vote to leave the EU, and how far to protect Britain'sfinancial services sector in upcoming EU talks.
Previous people to hold a similar role include Ed Balls, whoadvised former prime minister Gordon Brown when he was financeminister, and went on to serve as a cabinet minister and thenran unsuccessfully to lead the Labour Party in 2010.
Ward joined HSBC as an economist in 2006 not long afterleaving university, and first covered the British economy beforetackling global central banking themes and then becoming thebank's chief European economist late last year.
In June she was the lead author of an HSBC report which saidBritain's vote to leave the EU would act as a "major drag" oneuro zone demand, as Britain was the destination for 13 percentof euro zone exports.
"Potential disruption to supply chains and a general cloudof uncertainty may also weigh on growth in trade, and in turnbusiness investment," the report said.
Hammond and other British ministers have said the EU hasmuch to lose economically if it pursues a tough line in Brexittalks, though many economists have said Britain relies more onEU markets than the EU depends on Britain.
Ward also co-authored a report for HSBC in mid-2014 whichargued that inflation in asset prices including housing was"increasingly rampant" in parts of the world, and thatpolicymakers needed to stop bubbles developing.
The Bank of England has been at the forefront of so-calledmacroprudential measures - such as loan-to-value limits onmortgages - which the report said would allow central banks tokeep interest rates low while restraining asset price inflation.
Unlike changes in interest rates, many of these measuresneeded regular government approval, the report said.
"This will further blur the distinction between centralbanks and governments. So far as they ever could, central bankscan no longer ignore the wishes of their political masters,"Ward wrote with HSBC's chief UK economist, Simon Wells.
British Prime Minister Theresa May made an unusually directcomment about BoE policy on Wednesday when she said ultra-lowinterest rates and quantitative easing had bad side-effects. (Reporting by David Milliken; Editing by Stephen Powell)
