BoE Tucker's resignation may lead to 'more activist' MPC

Paul Tucker has resigned as Deputy Governor of the Bank of England, leading to suggestions the Bank's Monetary Policy Committee (MPC) could move in favour of a more activist monetary policy. Tucker, who joined the Bank of England in 1989 as Principal Private Secretary to Governor Leigh-Pemberton, worked his way up to Deputy Governor in March 2009. He served on the MPC from June 2002. But having been narrowly beaten, it is reported, in the race to be Governor in favour of the Bank of Canada's Mark Carney, he has decided to throw in the towel. As Tucker has voted against QE expansions in recent meetings, Barclays believes the departure may lead to a change in the UK's monetary policy outlook. Analyst Simon Hayes notes: "The deputy governorship is a Crown appointment, and is therefore in the hands of the government, and in choosing Mark Carney as the next Bank of England governor, Chancellor Osborne revealed a preference for 'monetary activists'. "It is therefore quite possible that Mr Tucker's replacement will be more inclined to support a monetary expansion."Having made that observation, Hayes acknowledged that MPC member Ian McCafferty had stressed the MPC's serious reservations about the wisdom of more QE at this time and how if the economic outlook continues to brighten, the MPC seems likely to conclude that no more support is needed."Moreover, arguably the biggest challenge facing the BoE over the next few years is to ensure that monetary policy and macro-prudential policy are appropriately configured and joined up. "The new deputy governor will be pivotal in this process, and the ability to take the fledgling Financial Policy Committee forward and to engineer an effective link-up with the MPC is probably a more important selection criterion than their view on the current monetary stance," added Hayes.Tucker has said he plans to spend a period of time in academia in the United States once he has left the Bank.However, rumours in the City point to the upcoming vacancies of the chair at Lloyds and Royal Bank of Scotland, with Sir Win Bischoff due to retire in May 2014 and RBS chief executive Stephen Hester penciled in to be staying on until the end of this year.OH