One of the main points Mr Cowley made was to ask Mr Carney to stop the policy of quantitative easing, given the stress this was having on gilt investments and, especially, pension funds that are heavily invested in UK government bonds.
He said: “The BoE website says that QE ‘does not involve printing more banknotes’. And yet one sentence later it says: ‘The Bank of England electronically creates new money and uses it to purchase gilts.’
“In an electronic world, QE is money printing. Otherwise, if QE is such a good idea, transfer the whole of the gilt market into the BoE and have done with it, because if it’s such a great policy then more of it must be better.”
Mr Cowley also suggested that Mr Carney, who will take up his post on 1 July, should appoint some “real people” to the Monetary Policy Committee, which he believes is almost exclusively comprised of people with connections with Cambridge University or who have worked at an American investment bank.
His comments were supported by Nigel Green, chief executive of advisory firm the deVere Group, who said the pension funds of older workers could be dealt “another hammer blow” when Mr Carney joins the BoE unless he refrains from QE.
Mr Green said: “Should this happen, it would be another hammer blow for those workers who are on the verge of retirement because quantitative easing forces down annuity rates, which have already reached historic lows.”
Malcolm Steel, adviser for Edinburgh-based Mearns & Co, said: “Mr Cowley makes some good points and I am broadly in support with what he says. “The economy is a critically ill patient at the moment and it needs whatever medicine is required to stop it becoming terminal. It can’t continue with such a loose monetary policy. But if it is pulled in too fast in the short term, it would be too much of a shock to the economy.”