Typically, Bank of Canada governors were incubated inside the walls of the central bank. David Dodge did not, but he was a long-time public servant. Mr. Carney is the first true Ottawa outsider to run the institution; it’s why so few people thought he was a serious candidate for the job, despite his growing reputation around the Finance Department.
It’s not easy for a governor to put his or her stamp on the Bank of Canada. By agreement with the government, the central bank’s primary mandate is to keep inflation contained around an annual rate of 2 per cent. That limits the scope for policy experimentation.
Still, when it came to using the primary lever in his job – short-term interest rates – Mr. Carney acted boldly, slashing its benchmark rate by half a percentage point in March, 2008.
The Bank of Canada prefers to raise and lower interest rates in quarter-point increments. The aggressive move was a reaction to signs that things were about to go bad in the U.S. that other central banks ignored until several months later.
“There were lots of us who thought things could get bad, but not as bad as they did,” said Andrew Spence, a managing director at the Ontario Municipal Employees Retirement System who crossed paths with Mr. Carney at the end his one-year term as an adviser at the central bank in 2003. “Mark had an inkling that it would be.”
Still, not all are blown away by Mr. Carney’s performance on monetary policy, especially academic purists.
Christopher Ragan, an economist at McGill University who has worked as an adviser at both the Bank of Canada and the Finance Department, says he’s a great admirer of Mr. Carney. He just thinks the adulation should be kept in perspective. “I don’t see a fundamental legacy; I don’t see a fundamental legacy for Dodge either,” Prof. Ragan said.
It’s also difficult to assess Mr. Carney’s policy record because the job only is half done.
The crisis is past, but a government report Friday that showed Canada’s gross domestic product grew at an annual rate of 0.6 per cent in the third quarter suggests the recovery is far from sound. Household debt levels have risen to record levels, in part because of the Bank of Canada’s ultra-low interest -rate policy. Housing prices in some cities look dangerously high, also because of low rates.
“It’s not clear whether some of the [monetary policy] decisions today are the right ones,” said Jack Mintz, director of the the University of Calgary’s School of Public Policy. “The real issue coming down the road is how we get out of this.”
And then there’s the matter of Mr. Carney’s celebrity.
On one hand, it opened doors that the governor of the Bank of Canada typically might not be able to open. “He allowed Canada to punch above its weight,” said Gordon Nixon, CEO of Royal Bank of Canada.
If the reports out of Ottawa are true, some in the Liberal Party came to see the central bank Governor as a potential leader. Mr. Carney denied the reports, but not aggressively enough to make them go away. The persistent rumours created the impression that Mr. Carney could be out of step with the government, risking the central bank’s credibility as an independent actor.
“He should have shut that thing down long before he did,” Prof. Ragan said. “It was becoming a problem.”
It’s not a problem any more.