Amid the Brexit chaos, who would want to run the Bank of England?

A little under two weeks ago the application deadline passed for those who hope to become the next Governor of the Bank of England. Mark Carney is heading off to pastures new on January 31 next year. It won’t be an easy task. A central banker’s life is no longer a happy one. Whereas, once upon a time, central bankers were regarded as masters and mistresses of the universe, recently they have been taken down a notch or two.

Despite the Bank’s provision of remarkably low interest rates and its experiments with so-called quantitative easing, the dynamic economic growth of yore is now but a distant memory: our monetary wizards have been unable to deal with our persistent economic underachievement.

Meanwhile, from a central banker’s perspective, the political backdrop has become distinctly weird. Mr Carney and his predecessor, Lord King, may not see eye to eye on the pros and cons of Brexit, but neither of them became governor in the expectation that Brexit would ever happen. A future governor will have to pick up the pieces once we’re out of the EU. And he or she will also have to cope with another potential worry: a change of government and, with it, a possible change in the Bank’s mandate.

There’s a big debate on both sides of the Atlantic about precisely what central bankers should be doing. Since the late Eighties our monetary boffins have focused on one primary objective: the pursuit of price stability. The previous two decades had been associated with inflationary excess that had led to poor economic outcomes. Low and stable inflation was regarded as a necessary and — for some observers — a sufficient condition of lasting economic health.

For a while that’s what central bankers achieved. Since the global financial crisis, however, confidence in their abilities has faded. Growth has been mostly weaker than expected in the US and much of Europe. More recently, inflation has also been too low.

It all feels a bit like Japan’s experience in its “lost decades”. After its financial bubble burst at the beginning of the Nineties, the Japan struggled to reinvigorate its economy. Interest rates dropped to zero long ago and no one thinks they’re likely to go up any time soon. Despite Prime Minister Shinzo Abe’s determination to push inflation back up, it still remains far too low.

Japan provides a useful template for the West’s economic challenges. For central bankers, this is all rather worrying. Politicians ultimately crave economic success because, with it, they can cut taxes, increase public spending and, frankly, be popular and win elections. And more and more of them are suggesting central bankers should do their bit in the pursuit of this economic and political nirvana. For Donald Trump that means chastising the Federal Reserve for having raised interest rates too far and keeping them there for too long.

The UK’s next Conservative prime minister — particularly if there’s a no-deal Brexit — may “encourage” the Bank of England to let sterling drop: after all, having lost access on preferential terms to the EU single market, Britain will need all the help it can get in making inroads into markets elsewhere in the world. And, in the event the Government falls and Jeremy Corbyn wins the next general election, the pressure on the Bank of England to engage in economic experiments will likely increase.

Maybe it will be asked to print money to finance a major increase in public borrowing. Perhaps it will have to use its powers to force banks to lend to specific parts of the economy in a bid to “pick winners”. And just possibly it will be asked to move to Birmingham.

The next Governor will therefore have to be nimble, able to please both a Brexiteer Tory government and a potentially experimental Corbyn one. That’s tricky. A Governor able to keep Boris Johnson happy, for example, may not so easily be able to put a smile on the face of John McDonnell. Put another way, a Governor sympathetic to Brexit and the beauties of free markets may not be quite so comfortable with telling banks who they should be lending to.

Two conclusions follow. First, for all their attempts to stand above the political fray, the current state of British politics suggests our central bankers will find themselves in the firing line. They are, after all, accountable to Parliament, and, in the event that the views of Parliament fundamentally change, they will need to adjust. Second, in the event that they fundamentally disagree with the economic line adopted by Parliament, central bankers will face an awkward choice: either go along with Parliament’s wishes even if they strongly object to what they’re being asked to do, or resign on a point of principle.

Eddie George, who held the reins when the Bank was granted its operational independence by Gordon Brown in 1997, almost resigned over the loss of the Bank’s financial supervision responsibilities (ironically, following the global financial crisis, it got some of them back). That, however, was a technocratic matter, how best to achieve an ambition — financial stability — that most people could broadly agree upon. A new governor may be faced with a more difficult problem, namely whether he or she can agree with the ambition itself.

And that makes me wonder. Given all these uncertainties, perhaps some of the best candidates for the job may already have torn up their CVs, deciding that, in these strange times, a job that would normally command an enormous amount of respect has become just a touch too toxic.

• Stephen King is HSBC’s senior economic adviser and author of Grave New World (Yale)