* Comments by PM May on BoE seen as unusually blunt
* Aides say May not trying to influence policy
* Carney has also said reliance on cenbanks unhealthy
* Carney facing decisions on rates, term at BoE
By William Schomberg
LONDON, Oct 6 Was British Prime Minister Theresa
May sending a warning to Bank of England Governor Mark Carney
when she highlighted the damaging side-effects of his ultra-low
May took the unusual step of commenting on central bank
policy on Wednesday when she said near-zero rates and the BoE's
huge bond-buying programme had hurt savers.
"A change has got to come and we are going to deliver it,"
May told her ruling Conservative Party as she spelled out her
plans to work for lower-earning Britons following the shock
Brexit vote in June that helped make her prime minister.
The blunt words represented a clear change of tone from
Downing Street, under its new occupant, towards the Bank of
England and were among the most direct from a prime minister
since the BoE won operational independence in 1997.
May wants to show she understands the frustrations of many
voters who delivered a stinging rebuke to Britain's
establishment in June by deciding to leave the European Union.
Aides denied she was seeking to influence the BoE's policy
decisions with her comments. Instead, she was signalling the
need to pursue new ways to spread the benefits of growth, they
But Mohamed El-Erian, chief economic adviser to Germany's
Allianz, said officials at the BoE would be
"astonished" by the comments.
"The remarks are unlikely to have an immediate impact on
Bank of England policies," El-Erian told Reuters. "But they are
part of a broader warning that is applicable to central bank
autonomy around the world."
U.S. Republican presidential candidate Donald Trump has
accused the Federal Reserve of keeping interest rates low
because of political pressure from the Obama administration.
In Germany, Chancellor Angel Merkel said in April that it
was legitimate for people to question the European Central
Bank's record low interest rates.
Carney too has faced harsh criticism from some leading
supporters of the Leave campaign in June's referendum who have
accused him of bias.
Carney has dismissed the criticism and described himself as
"absolutely serene" about the way the central bank prepared for
the Brexit vote.
He was widely praised for showing investors that Britain's
economy remained in safe hands during the chaotic days that
followed the referendum shock in late June.
The BoE will also be a key player as Britain enters
politically fraught negotiations with the rest of the EU about
how much access it will have to the bloc's markets. Sterling hit
31-year lows against the U.S. dollar this week.
The BoE is due to decide in early November whether to follow
through on signals it might cut rates again to a fraction above
May's comments also come at a sensitive time personally for
Carney who has said he will decide before the end of this year
whether he will leave the BoE in mid-2018 as originally planned,
or take up an option to stay until 2021.
However, Carney would probably agree with parts of her
speech in which she said the BoE's actions had helped the
economy through the aftermath of the 2007-09 financial crisis.
Similar to May, he has said governments needed to do more to
encourage growth through their budgets and through reforms to
make economies more competitive after years of reliance on
near-zero interest rates and bond-buying.
Indeed, May's finance minister, Chancellor of the Exchequer
Philip Hammond, has said he is considering how much help
Britain's economy needs after the Brexit vote. He is due to set
out his plans on Nov. 23 when he delivers his first budget
But May's comments could make it harder for the BoE to
expand its bond-buying programme in future, should Britain's
economy need more help.
Former BoE rate-setter Andrew Sentance said he did not think
May wanted a full-on confrontation with Carney, but Wednesday's
comments were a sign of a new relationship with the BoE and the
government which sets the mandate of the central bank.
As finance minister, Hammond's support is required for any
future expansion of the BoE's quantitative easing programme.
"We have enough challenges right now with Brexit without May
overthrowing the independence of the central bank," Sentance
said. "But the mood music around monetary policy is definitely
(Additional reporting by Guy Faulconbridge and Jamie McGeever
Editing by Jeremy Gaunt)