Huw Pill: Who is the BoE’s new chief economist?

Here we go again. The Bank of England has appointed a white, middle-aged Oxford and Stanford-educated man who worked at Goldman Sachs and Harvard Business School to be its new chief economist. 

In other words, here’s another pale, male and stale posh boy who has been chosen by his central banking mates and parachuted into one of the most exclusive clubs in the world because he ticks all the right boxes. 

Or at least that’s the ridiculous line much of the press and a couple of ex-Monetary Policy Committee members would have you believe on hearing about Huw Pill’s elevation to the Old Lady of Threadneedle Street. One former MPC member, Danny Blanchflower, said that he was underwhelmed by the appointment: “Am I wrong doesn’t ex-Goldman Huw Pillseem awfully like ex-Goldman Ben Broadbent? What happened to diversity?” 

Blanchflower was not the only one to complain about the lack of diversity and inclusion shown by the Bank’s hiring of Pill. One hack opined that the Bank had hired “diversity consultants” – the nearly all-female Sapphire Partners – specifically to help the Old Lady appoint a woman or someone from a minority background to fill the big boots left by the previous chief economist, Andy Haldane.

Others pointed out that by selecting Pill, who is also a member of the influential MPC which sets interest rates, the Committee remains all white and has “just two women” out of the nine members. 

When will this nonsense end? Does it matter how many women there are on the MPC? So what that Pill is not a woman? So long as there is a diversity of views rather than groupthink on the MPC, it is fatuous to suggest that sex or colour clouds their judgement. 

What we want to know is whether Pill is up to the job – and indeed, whether he is the best person for the job. Choosing a chief economist is not the easiest of tasks: it’s a complex – and, yes, “diverse” – role which needs a great mind who can do the nuts and bolts of cranking out actual analysis of the economy in real time, applied forecasting, managing research staff, processes and change. 

You also need someone who knows the intricacies of the financial markets, who can price the yields on bonds and who can work out the effects those prices will have. 

Huw Pill has done all of that in previous incarnations: at the Bank of England back in the early 1990s in a previous life, but more critically at the European Central Bank where he worked with Jean-Claude Trichet from 1998, through the financial crisis and the Eurozone collapse, until 2011, so he has dealt with several crises head-on and hands-on. 

Then he was hired by Goldman Sachs, rising to become its European chief economist, which has become something of a breeding ground for top central bankers and a subject of much criticism. Yet there is another way of looking at why there seem to be an awful lot of ex-GS folk working at the Treasury (Rishi Sunak for one) and at the Bank, with Ben Broadbent and, of course, ex-Governor Mark Carney. It’s not so much that central bankers particularly go after GS boys, more that GS likes to hire former central bankers because of their expertise and experience.

Not many economists have done all of the above which means the pool in which the Bank of England fished for its new boy is de facto a small one, and one in which the male and pale variety of human tend to dominate. That’s just a fact.

So let’s skip the gender stuff. And as for diversity, if you want to be picky, Huw Pill is Welsh with British and Irish nationalities. What’s more, he went to what can only be described as an ordinary comprehensive school, Whitchurch High, in north Cardiff. Yet like most schools, each has its own special qualities and Whitchurch is known locally as the “school of champions”, as so many sporting heroes including footballer Gareth Bale, star rugby player Sam Warburton and cyclist Geraint Thomas are all old boys. 

Now let’s get to the nitty gritty. What does Pill think about the economy, and what is his worldview? Is he for more QE or less? And is he a hawk when it comes to putting up interest rates to stave off inflation? Is he pro-crypto and digital currencies or against? These are the big plays.

The truth is that not much is known about Pill’s outlook, mainly because he has been locked away lecturing at Harvard for the last few years and maybe because Harvard pulled his CV down – including his many research papers – from its site within hours of his new role being announced.

Yet there are some clues hidden deep in the archives, including his submission to the House of Lords’ recent inquiry into the Bank’s controversial policy of Quantitative Easing. 

What they suggest is that Pill takes a similar view to the new approach being taken by the Bank of England itself, which is that it’s time to rein back on QE. According to papers dug out by poundsterlinglive.com, Pill takes a special interest in what’s called “non-standard monetary policies” which include the QE programmes that have been used by all the world’s central banks as well as crisis-inspired policy tools like the “enhanced credit support” measures implemented by the ECB at the height of the 2008 global financial crisis.

In one paper for the ECB in 2011, Pill wrote a paper titled “Non-standard monetary policy measures and monetary developments” which concluded: “We interpret our results as offering evidence in support of the view that the introduction of non-standard measures has supported the availability of monetary liquidity to the non-bank private sector and flow of bank loans to households and, especially, corporations – resulting in an outcome that largely mimics what would have been anticipated in the face of the observed sharp fall in economic activity were the financial sector to be functioning normally.”

He went on: “Yet the measures appear less successful in supporting the dynamics of broad money, which is usually seen as having a relationship with macroeconomic stability over longer horizons.”

So what does that mean? It suggests Pill believes QE should be limited and conditional, and that while QE and other expansionary policies have a good short-term impact during crises, over the longer-term they are not so helpful, if not dangerous.  

That rather confirms that Pill will support the Bank’s recent shift towards beginning the process of winding down QE although it will complete the current programme with another £50bn by the end of the year.

As the Bank stated in the August report, it plans a new approach for QE to start winding down. The plan is to start reducing its £875bn stock of government bonds through a mixture of non-reinvestment as well as selling bonds back to the market once the base rate has risen to 0.5 per cent, and then cut back on the stockpile to pre-Covid levels when the base rate has hit 1 per cent.

Looking ahead, such a strategy could see bond yields rising faster than thought, which would in turn support sterling as interest rates are forecast to rise again next year. 

At the last August meeting, the vote was unanimous to keep the base rate at 0.1 per cent. But another vote on whether to go ahead with finishing QE saw a seven to one decision, with the more hawkish Michael Saunders voting against because of fears that the strong recovery is pushing up inflation. 

All eyes will now be on how the new chief economist votes at the next MPC meeting scheduled for 23 September when members meet to decide again on interest rates and asset purchases. Then we can see whether Pill is the bitter-sweet type.