Sir John Gieve served as Deputy Governor of the Bank of England from 2006 to 2009. He was also a member of the Monetary Policy Committee and sat on the board of the FSA.
Before joining the Bank, Sir John was Permanent Secretary at the Home Office during a period when the department was responding to the increased terrorist threat in the wake of 9/11. Other responsibilities included programmes to reduce crime and anti social behaviour, co-ordinating the Criminal Justice System, the identity card scheme, immigration and asylum.
Before the Home Office John spent twenty years at the Treasury, involved in banking and City regulation, energy, public services and the Budget. He carried out spending reviews for both Labour and Conservative governments, and served as Private Secretary to three Chancellors: Nigel Lawson, John Major and Norman Lamont.
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Q & A
JLA: Do you see G20 progress in 2011?
JG: I don't expect much of substance beyond blessing the work on regulation being done by the Financial Stability Board and the Basel Committee. I'm expecting the US economy to grow and unemployment to start downwards, so that will take some urgency out of their approach to the G20. At the same time the stand-off between Congress and the President will make progress difficult, whilst the Euro area will be absorbed with its own problems.
JLA: Is Coalition turning out better than a traditional majority government?
JG: Oddly it seems there's more trust and cooperation between the partners than there was for many years within Labour. The need to carry both parties is leading to better preparation and discussion of decisions - but it will be harder to keep the LibDems on board in the coming year.
JLA: How great a problem might inflation become in 2011?
JG: It will remain above target - but I don't think 3-3.5% should or will worry the Bank of England so long as wage increases stay low.
JLA: What are the prospects for interest rates?
JG: Interest rates will take a year or two to get back to the normal 4-6% range. But if we have four more quarters of respectable growth, as I expect, the Bank will make a start - perhaps to 1.5%. Provided Euro brinkmanship doesn't reignite a banking crisis, I expect the ECB to raise rates in H1 in response to German growth. The Fed may be the slowest to move, because of the assurances they've given and the weight they give to unemployment.
JLA: What shocks might still be lurking on the horizon?
JG: The sovereign debt crisis in the Eurozone has not gone away, but I expect they'll do what's necessary to allow Spain to preserve its banking system and prevent contagion to Italy, Belgium or France. The other shock already in view is inflation in China - there's always a risk of boom turning to bust. Meanwhile at home the Coalition will find it very difficult to deliver the savings they've promised alongside all the reorganisation to which they're committed, notably in the NHS. Added to that the threat from terrorism remains high - and somewhere a President will be assassinated, there will be a terrible natural disaster and a new war will start.