LONDON: Britain named Silvana Tenreyro, a trade-focused London School of Economics academic, as a Bank of England rate-setter on Monday at a critical time for the economy as Brexit talks begin.
Tenreyro’s appointment also comes amid a deepening split over the need to raise interest rates for the first time since before the global financial crisis a decade ago.
She will replace the strongest advocate for a rate hike on the BoE’s Monetary Policy Committee, meaning economists will scrutinize her opinions even more closely than usual.
Tenreyro’s work has focused on issues including trade and wage growth, both of which are important factors for the BoE’s thinking as Britain prepares to leave the European Union and as pay increases have fallen behind inflation.
Robert Barro, a Harvard University economics professor who steered Tenreyro through her doctorate, said she had been a great success — particularly on research about the links between international trade and exchange rate regimes.
“She is very knowledgeable about economic fluctuations and the role of monetary policy. So, I think she’s a great appointment,” Barro said.
Tenreyro — who has British, Italian and Argentine citizenships, according to her resume on the LSE website — was one of 280 economists who signed a public letter which said it would be a “major mistake” for Britain to leave the EU in the run-up to last year’s Brexit referendum.
In an annual Financial Times survey of economists published in January, Tenreyro described a “difficult trade-off” for the BoE in balancing rising inflation and weak growth — echoing Governor Mark Carney’s language at the time.
“The (next move in interest rates) could go either way. Certainly the terms for Brexit will affect where the economy ends up — and the subsequent actions of the BoE,” Tenreyro said.
She also thought Britain’s economy would expand around 1.5 percent this year, roughly in line with the BoE’s central forecast at the time.
“My pessimism regarding Brexit has not moved much: I think it will have a negative impact on the UK economy and Europe more generally,” Tenreyro said.
She spoke about the risks of a “hard Brexit” in which Britain leaves the EU single market and imposes stringent immigration quotas.
“The effects on the UK economy will certainly be negative — many firms will need to rethink and reorganize production as they lose talented workers,” she told the FT.
REPLACING A HAWK
Before working at the LSE, Tenreyro was an economist at the US Federal Reserve Bank of Boston between 2002-04 and an external member of MPC at the Bank of Mauritius between 2012 and 2104, the ministry said.
She replaces Kristin Forbes whose MPC term expires this month. Forbes was one of the three policymakers who voted last week to raise interest rates. The MPC’s five other members voted to keep rates on hold.
Jordan Rochester, a foreign exchange strategist with Nomura in London, said it was unlikely that Tenreyro would immediately vote against the majority who remain in favor of keeping rates at 0.25 percent.
“We would assume a slight swing to a more dovish vote,” he said in a note to clients.
The BoE is also seeking a replacement for former deputy governor Charlotte Hogg who quit in March after failing to report a potential conflict of interest involving her brother’s position at Barclays.
The finance ministry said on Monday that Hogg’s replacement would be appointed in due course, restoring the MPC to its full quota of nine members.