July 28, 2015 / 8:57 AM / 4 years ago

Hedge fund economist to join Bank of England's MPC

LONDON (Reuters) - An economist from one of the world’s biggest hedge funds has been appointed to help set Bank of England interest rates, Britain’s finance ministry said on Tuesday.

A pedestrians walks under an arch opposite the Bank of England in London March 5, 2015. REUTERS/Suzanne Plunkett

Gertjan Vlieghe will step down from his role as a partner at Brevan Howard, which runs a $24 billion (15.41 billion pounds) macro hedge fund that bets on interest rate moves, to return to the BoE where he previously worked as an advisor to former governor Mervyn King.

Vlieghe, a 44-year-old dual British-Belgian national, was also a European interest rate strategist at Deutsche Bank.

His three-year term begins in September. He will succeed David Miles, who for much of his time at the BoE was one of its strongest advocates for more economic stimulus.

Vlieghe arrives at a sensitive time for the British central bank, which is considering its first post-financial crisis interest rate rise — a decision Governor Mark Carney has said will come into sharper focus at the turn of the year.

Some economists said Vlieghe’s research history indicated he might take a dovish approach to monetary policy, similar to the stance taken by Miles, who steps down in August.

“Dr Vlieghe is an economist of outstanding ability who brings experience from his time at both the Bank of England and the financial services industry,” finance minister George Osborne said in a statement.


Angus Armstrong, director of economics at Britain’s National Institute of Economic and Social Research, described Vlieghe as a calm and deep thinker.

“He has a very good understanding of the details and the operation of international financial markets today, but also an excellent understanding of economic and financial history.”

A paper authored by Vlieghe in 2010 suggested policymakers should tolerate some variations in the rate of inflation, as the costs of stabilising inflation too aggressively can be large.

Barclays economist Fabrice Montagne said he believed Vlieghe’s appointment will maintain the balance of views on the MPC, based on his past research.

“We expect Mr Vlieghe to join the ranks of Mark Carney, Ben Broadbent and Sir Jon Cunliffe, in expressing a cautious stance, if not supporting Andy Haldane’s view of a rate cut being as likely as a hike,” said Montagne.

Brevan Howard is one of the biggest players in the $3 trillion hedge fund industry, but last year recorded its first annual loss, ending an 11-year winning run.

In May, Brevan Howard and other financial institutions came under scrutiny after European Central Bank Executive Board member Benoit Coeure gave a speech to an invitation-only dinner of fund managers, bankers and academics in London.

At the dinner, which was organised by institutions including a research institute founded by Brevan Howard, Coeure made comments which moved the euro hours before his speech was made public.

A Treasury spokeswoman said Vlieghe had stepped down from active duties at Brevan Howard but would retain existing vested rights to share in future earnings, in line with BoE policies.

Additional reporting by Ana Nicolaci Da Costa and David Milliken; Editing by Ralph Boulton

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