Mervyn King was appointed to serve a second term as governor of the Bank England. He has been respected central banker over his tenure, but has been under criticism during the the current credit crisis for doing too little too late. There has been similar comments about Fed chairman Bernanke. The expectation is that the key central banker will provide special leadership during times of high uncertainty.
For all of the talk about setting targets for monetary policy, it still seems like the man makes the central bank. While inflation targeting along with Taylor rules have taken hold with many of the central banks, it is still the cult of personality that have kept markets calm. Governor King has done a great job of maintaining inflation within the Bank's target while managing a long period of prosperity. Yet, the quality of his leadership will be tested in 2008. The credit crisis is not over, growth is slowing and the pound is overvalued. It is America-lite. We will have an interesting test comparison between Bernanke and King during similar economic environments.
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