New chief plots steady course
Strategy not likely to be dramatically different in spite of ‘surprise’ appointment, experts say
OTTAWA— Stephen Poloz, who is replacing Mark Carney as head of the Bank of Canada, signalled the central bank is unlikely to push up borrowing costs any time soon.
“We’re in a recovery mode but a recovery that is not as robust as expected,” the new bank governor said of the Canadian economy.
“We will have to stimulate the economy for a certain period of time,” he said, speaking in French after his appointment was announced Thursday.
In hopes of fuelling economic growth, the bank under Carney has kept its key overnight rate at a rock-bottom1per cent since 2010. But weak global conditions have dragged Canada down, and economists expect the central bank to keep borrowing costs very low until late 2014.
Poloz, 57, who joins the bank on June 3 for a seven-year term, is an economist who has been head of Export Development Canada, the Ottawa-based Crown corporation that supplies financing for companies selling products overseas. Previously, he spent five years at an economic research firm in Montreal and 14 years at the Bank of Canada, where he was in charge of the bank’s crucial research activities. “Stephen Poloz has a long and distinguished career in the public and private sectors with 30 years’ experience in financial markets, forecasting and economic policy,” said Finance Minister Jim Flaherty, who had final say in the four-month search for a new central banker. “I am confident he has the skills and experience required to lead the Bank of Canada at a time of global economic uncertainty.” Poloz takes over from Carney, a media-savvy former investment banker who gave the Bank of Canada a high profile and achieved a national reputation for helping Canada survive the 2008-2009 recession. Carney is leaving Ottawa 18 months before his term ends. He becomes head of the Bank of England in July. Poloz made it clear he understands the difficulties faced by Canadian companies. Exports have been made less competitive by the high value of the loonie and they face slumping demand in many countries. “The global economy still has its fragilities,” he told reporters. “We aren’t out of the woods yet and Canada will feel all those shocks as they occur.” But he said the central bank’s approach — balancing the need to keep inflation subdued against the need to boost economic growth by keeping interest rates as low as possible — has proved itself “very well.”
“The move was a surprise, but I don’t look for any change in monetary policy,” Craig Wright, chief economist at the Royal Bank of Canada, said of the appointment.
Poloz’s indication that the bank will have to keep borrowing costs low to prompt growth makes him a good fit for Prime Minister Stephen Harper’s government. In order to fulfil an election promise to balance Ottawa’s books by 2015, the Conservatives are reining in federal government spending. This means others — such as private business, consumers or the Bank of Canada — may have to do more to provide economic stimulus in the next few years. But Poloz declined to comment Thursday on the impact of government spending cutbacks.
He stressed that the bank’s priority of keeping inflation down is “sacrosanct.”
Poloz was picked ahead of Tiff Macklem, who was Carney’s top deputy and was widely seen as the likely choice for the next governor.
Commenting on Flaherty’s choice, Carney said: “I’ve known Steve Poloz since I first came to Ottawa a decade ago. I’ve always enjoyed his sharp insights on the Canadian and global economies and I’ve admired his sound judgment and inspired leadership at EDC.”
Poloz, who was born in Oshawa, has a doctorate and master’s degree in economics from Western University in London, Ont., as well as a bachelor’s degree in the same field from Queen’s University in Kingston. He and his wife, Valerie, have two children. With files from Reuters