Canada named Stephen Poloz, the head of the nation’s export-financing agency, to lead the Bank of Canada in a surprise appointment to replace Mark Carney.
The central bank announced the appointment, effective June 3, in a statement today from Ottawa. Carney is due to depart June 1 and take over as Bank of England Governor a month later.
Poloz, 57, is chief executive officer of Export Development Canada, a government trade financing agency. His selection as the ninth governor of the bank bypasses Tiff Macklem, 51, who was Carney’s top deputy and the candidate economists predicted would be promoted to the top job.
“Stephen has a long and distinguished career in the public and private sector,” Finance Minister Jim Flaherty told reporters today. “He is an excellent choice to lead the Bank of Canada into the future.”
Poloz will take over responsibility for setting Canada’s benchmark interest rate, which has been 1 percent for more than two years. Policy makers in the world’s 11th largest economy are grappling with a strong currency and sluggish global demand that are hampering exports, record consumer-debt loads that are curbing spending and inflation below the central bank’s 2 percent target.
The Bank of Canada is alone in the Group of Seven signaling that an increase in rates is possible while central banks in the U.S., Europe and Japan purchase assets to spur growth.
Canada’s currency weakened on the announcement, dropping 0.2 percent to C$1.0104 per U.S. dollar at 4:58 p.m. in Toronto. One Canadian dollar buys 98.97 U.S. cents.
“The consensus view on the street that he’s probably a pretty dovish candidate, that will probably lead to easier monetary policy than we otherwise would have expected,” Jamie Price, director of fixed income at Macquarie Private Wealth in Toronto, said in an interview. “Certainly, that’s reflected in the market since then; we had a little downtick in the Canadian dollar since that announcement.”
Bank of Canada policy makers said in an April 17 decision that “considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required.” The bank cut its 2013 growth outlook to 1.5 percent from 2 percent because of lower business investment and government spending and said economic slack will persist for more than two years.
Like the Bank of Canada, Poloz has said Canadian exporters are under pressure from a persistently strong Canadian dollar and must find new markets and products to remain competitive. “Our exporters face stiff competition from new entrants and a strong currency,” Poloz said in an April 2012 speech in Tokyo.
Poloz joined EDC in 1999 as chief economist after three years with Bank Credit Analyst Research in Montreal and 14 years at the Bank of Canada in roles that included head of the research department. It’s the third straight time the senior deputy failed to be promoted to the governor’s job, following David Dodge who moved from the finance department to take the helm in 2001, and Carney, a former Goldman Sachs Group Inc. banker, in 2008.
While Carney has said companies are stockpiling “dead money” that should be used to invest, Poloz said in a 2011 speech that companies are building cash in response to a volatile global economy.
“Successful companies are stress-testing their business plan with a vigor never thought necessary in the past,” Poloz told the Toronto Board of Trade in October 2011. “There are costs associated with this behavior, but they are seen as sunk costs - they are necessary insurance against the next black swan, and this environment breeds them.”
EDC’s mandate was expanded in 2009 during the global financial crisis, allowing it to support domestic lending. Some of those powers were extended in the last federal budget in March.
Poloz, who was born in Oshawa, Ontario, east of Toronto, has a doctorate and master’s degree in economics from London, Ontario’s Western University as well as a bachelor’s degree in the same field from Queen’s University in Kingston, Ontario. He and his spouse, Valerie, have two children.
Carney surprised financial markets Nov. 26 by saying he would leave his job and cut short his seven-year term by 20 months to take over the Bank of England.
The Bank of Canada’s six-member Governing Council works by consensus. Unlike the U.S. Federal Reserve, it doesn’t publish meeting minutes or vote tallies.
Other possible candidates for governor included former Deputy Governor Jean Boivin; Bank of Montreal Vice Chairman Kevin Lynch; Chris Ragan of McGill University in Montreal; Andrew Spence of the Ontario Municipal Employees Retirement System; and former Toronto-Dominion Bank chief economist Don Drummond, according to economists who have advised the government and central bank. Stanford University professor Darrell Duffie was also considered, according to the Globe and Mail newspaper.
The government had a “wealth of talent” within the pool of candidates for the position, Flaherty said during the press conference.
The central bank’s board of outside directors selects governors with the approval of the federal cabinet. The job is for a seven-year renewable term and last year paid a range of C$431,800 to C$507,900. That’s higher than Prime Minister Stephen Harper’s 2012 salary of C$315,462, a figure that doesn’t include other perks such as the official residence. By comparison, Richard Waugh, chief executive officer of Bank of Nova Scotia, Canada’s third-biggest lender, received C$11.1 million of compensation last year.