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Raghuram Rajan signals Brexit politics deterred him from seeking BOE job

Former Reserve Bank of India governor Raghuram Rajan has indicated the political challenges posed by Brexit were the reasons he didn’t apply to head up the Bank of England.

In an interview with the BBC, Rajan confirmed he hadn’t sought the position and cited the fact that central banking “has become much more political in recent times” as an explanation for why not.

The government is seeking a successor to Mark Carney, who will step down in January. Carney has been thrust into the heart of the Brexit debate either by having to adjust monetary policy to react to it or because of criticism from some lawmakers that he is overly pessimistic about the economic risks of leaving the European Union.

“It’s best a country has someone who understands the political situation within that country and knows how to navigate that,” Rajan told the BBC. “It’s obvious I’m an outsider and I have very little understanding of the deep ebbs and flows of politics in that country.”

Rajan, who now teaches at Chicago Booth School of Business and once served as chief economist of the International Monetary Fund, was recently named as the second most likely to get the BOE job by economists in a Bloomberg News survey. He trailed Andrew Bailey, the chief executive of the Financial Conduct Authority.

‘Perfectly Happy’

Chancellor of the Exchequer Philip Hammond started searching for a replacement for Carney in April and has attracted 30 applications. He met with Rajan in January, according to the Treasury, although Rajan declined to tell the BBC if he had been approached to run the central bank.

“I’m perfectly happy in my job,” he said. “I haven’t applied for any job.”

Hammond, who is likely to exit the Treasury once a new prime minister takes office next week, had spoken of looking for a new governor with international experience. Former Federal Reserve Chair Janet Yellen also didn’t apply, a person familiar with the matter said this week.

The reluctance of foreign economists to step forward may boost the chances of domestic contenders such as Bailey or current BOE officials Andrew Haldane, Jon Cunliffe, David Ramsden and Ben Broadbent. Others linked to the role include Shriti Vadera, the Santander Plc chair, and Sharon White, outgoing chief executive officer of regulator Ofcom.

Gerard Lyons, a former economic adviser to Boris Johnson, the likely next prime minister, has been interviewed for the job, according to The Times.

Rajan knows first hand of the political challenges of being a central banker. He left India’s central bank after just one term amid heavy criticism from segments of the government for offering opinions on matters unrelated to monetary policy.

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