BoE hopeful speaks out on euro rate

Andrew Crockett, the second-favourite candidate to replace Sir Edward George as Governor of the Bank of England, will tomorrow make a keynote speech about the 'right' parity for the pound within the European Exchange Rate Mechanism.

His talk, entitled 'The importance of the exchange rate - was DM2.95 right after all?' will be given at a conference to mark the tenth anniversary of Black Wednesday.

Crockett was the Bank's executive director for international affairs on Black Wednesday. He recently announced he was stepping down as general manager of the Bank for International Settlements in Basel, Switzerland.

Central bankers rarely comment on movements in foreign exchange markets, but his words will have added significance, given the debate over the euro. The entry rate will be vital in determining whether Britain joins the single currency. Some City economists now say €1.5, the euro equivalent of DM2.95, is a plausible entry rate.

Crockett's speech will be watched carefully by campaigners on either side of the euro debate. He is thought to be a mild europhile, and pro-euro campaigners are looking to him to back their contention that the ERM exit has no bearing on the economics of euro entry.

City economists said it was unlikely that Crockett would use the speech to back the euro. 'But I don't think Mervyn King [Bank Deputy Governor, and favourite for the governorship] would do this. Giving a speech with this title is not the action of a risk-averse man,' said one City economist.