Some time in the next couple of weeks, three at the most, we’ll find out if we need to start looking for a new Bank of Canada boss. Odds are strong that Stephen Poloz is about to formally start the clock on his retirement.
Mr. Poloz’s seven-year term as Bank of Canada governor expires at the beginning of next June. While the rules do allow a sitting governor to apply to return to the job for a second term, one-and-done has become the norm. The Bank of Canada hasn’t had anyone re-enlist since Gerald Bouey 40 years ago.
Besides, Mr. Poloz will be a few months shy of 65 when his term ends. While he has never come right out and said that he isn’t interested in staying in the job well into his 70s, he has put up little objection when reporters have suggested to him that his stint in the office is winding down, or asked him to muse on his legacy. He sounds like a governor comfortable with passing the baton six months from now.
That might sound like plenty of notice to give an employer, but selecting a new Bank of Canada governor is not the quickest process in the world; something more like nine-months notice has been the norm. Mr. Poloz’s announcement of his intentions has been delayed by the federal election campaign (during which the Bank of Canada maintains silence), and awaiting the swearing-in of a new cabinet (which has final say on the appointment of a new governor). Now, the central bank is in another silent period ahead of its next interest-rate decision on Dec. 4.
That leaves the bank a comparatively short runway for finding the next governor. An announcement on Mr. Poloz’s future will get the ball rolling – perhaps before the end of next week, and almost certainly before Christmas.
Assuming Mr. Poloz announces that he won’t pursue a second term, the next step will be to publicly advertise the position – the old-fashioned way, in help-wanted ads placed in a handful of major news publications. (Last time it was The Globe and Mail, La Presse and The Economist, to reach potential candidates in the English-language, French-language and international press, respectively.) That will be followed by an application period, interviews and a recommendation from the bank’s independent selection committee that then goes to cabinet for approval. The bank should unveil a new governor sometime in the spring.
Mr. Poloz hasn’t always been to everyone’s liking. He’s never been as slick as his predecessor, Mark Carney. He’s a bit too folksy for some, maybe too casual with the language for others who had grown used to the usual dry precision of central-bank communications. His message hasn’t always been well understood. He drew the ire of financial markets for a couple of surprise rate moves. Some observers have blamed the Bank of Canada’s persistently low interest rates throughout most of his tenure for deepening Canada’s household debt problems.
In December, 2012, when a Canadian Press poll named Mr. Carney “Business Newsmaker of the Year” shortly after he announced his departure to join the Bank of England, the runner-up in the poll was “The Canadian in debt.” It’s a reminder that extreme household debt burdens were a major national worry – and, by extension, a key concern for the Bank of Canada – when Mr. Poloz applied for the job. Seven years later, that monkey still steadfastly clings to the governor’s back.
But if that is the great failing of Mr. Poloz’s tenure, it must be said that in the ways that most matter in this job, he has unquestionably succeeded. The formal objectives, in terms of guiding the country’s monetary policy, are to achieve an economy at or near full capacity while maintaining inflation close to a 2-per-cent target. As we stand now, the bank estimates that the economy was a thin 0.5-per-cent short of full capacity in the third quarter, while unemployment is hovering near 45-year lows. Meanwhile, core measures of inflation have held steady, at or near 2 per cent, for most of the past two years.
This isn’t the kind of job that’s ever really “finished." There’s always the next turn in the business cycle, always new issues to address, new economic challenges to face. Even in his final six months, Mr. Poloz will wrestle with whether to cut interest rates in the face of a slowing global economy and heightened trade risks – something the bond market sees as a 50-50 bet before his term expires.
The best any governor can do is to hand over the house in better shape than he got it. As his retirement decision nears, Mr. Poloz can fairly say that he’s done just that.