The announcement that Stephen Poloz will succeed Mark Carney as Governor of the Bank of Canada was a surprise – senior deputy governor Tiff Macklem was a strong internal candidate for the position – but no shock.
Mr. Poloz was a leading outside candidate from the moment the search for a successor to Mr. Carney began. Not only had he spent 14 years at the Bank of Canada, rising to head its research department, but his subsequent experience – most notably at Export Development Canada, which he has led since 2011 – developed his contacts in the business world and his management capacity. He is personable and an able communicator – key assets in any job, and particularly for a central bank governor.
No shock, either, when it comes to Canada’s monetary and macroeconomic policies. As the announcement from Finance Minister Jim Flaherty highlighted, Mr. Poloz’s time at the Bank of Canada coincided with the development of the inflation-targeting framework that has guided monetary policy, and delivered inflation remarkably close to its 2-per-cent target since the mid-1990s.
Low and stable inflation and central bank policies that put pursuit of that target ahead of other priorities and temptations were key reasons why Canada went into the 2008 crisis – and emerged from it – in better shape than most other developed countries. Central bank watchers naturally scrutinize every word and gesture from governors for clues about interest rates, the exchange rate and much else, and a change in leadership alters their normal magnifying glass into a microscope. The framework has proved its durability over several leadership successions and economic gyrations, however, and few changes under Mr. Poloz is likely to be visible to the naked eye.
Widespread expectations for shifts after Mr. Carney’s departure may, nevertheless, be one of the key challenges Mr. Poloz faces when he takes the job on June 2. Monetary policy often makes news, and has been in the headlines almost continuously for the past six years. Many people are nervous, both about keeping interest rates very low for very long, and about what might happen if they rise.
The Canadian dollar’s exchange rate, high or low, is always a problem for someone. And many of the world’s most important central banks are under pressure. The U.S. Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England – which will have a particularly high profile in Canada once Mr. Carney takes over in June – are all pumping unprecedented amounts of liquidity into sluggish economies, attracting criticism for insufficient aggressiveness in promoting growth and carelessness about sparking inflation at the same time.
The climate of opinion elsewhere inevitably influences expectations about what the Bank of Canada can and should do, and especially after coming in from outside, Mr. Poloz will need to put reinforcing the nature and success of recent Canadian monetary policy high on his to-do list.
Mr. Poloz’s appointment validates a theme throughout the search for Mr. Carney’s replacement: that there was more than one very strong candidate for the job. It’s an attractive post for many reasons, not least because Canadian monetary policy and the Bank of Canada’s role in setting it are on firm foundations. So while the man himself may be something of a surprise, there’s no shock in the announcement. Nor in its implications for Canada’s economy.
William Robson is president and CEO of the C.D. Howe Institute.