Raghuram Rajan, the highly respected Chicago-based economist and former Reserve Bank of India governor, said he would not apply to become governor of the Bank of England when the vacancy is advertised later this year.
Speaking at an event on Wednesday evening at the University of Chicago Booth School of Business in London, Prof Rajan insisted he already had a good job which he enjoyed.
“I have a very good job at the University of Chicago and actually I am an academic not a central banker. I am very happy in my role,” Prof Rajan said.
Asked whether he would apply for the role when it is likely to be advertised in July, he added: “I am not going to apply for the job, no”.
He declined to say whether he would consider the role if approached.
Prof Rajan, who was seen as a successful governor of the Indian central bank until 2016 and is a former chief economist of the IMF, was one of the few economists to warn publicly and prominently of the dangers building up in the financial system well before the 2008-09 crisis.
Some in Whitehall think attracting a prominent world figure to the BoE would allow Britain to stand taller on the global stage as it leaves the EU. Mark Carney also did not apply for the BoE role in 2012 before his appointment and said publicly that he was not interested in the job and would “never” apply.
Prof Rajan warned that central banks might be “trapped by their inflation mandate”, generally seeking to keep price rises around 2 per cent a year. He suggested that it was much easier to get inflation down with higher interest rates than to push it up if it is too low, as it has been in many advanced economist since the crisis.
But he said that it was very difficult to change a central bank’s mandate, for example to target a higher rate of inflation, which would allow the authorities to have higher interest rates in normal times, giving them greater leeway to cut them in a recession.
“If you can [change the mandate once] you can do it again and you lose a fair amount of credibility,” Prof Rajan said. “Better to do it at a time when there is no pressure on the mandate itself.”
Seeing these occasions as very rare, he said: “It may well be that we’re prisoners of our mandate and we just have to live with it”.