Flaherty May Name New BOC Head as Carney Departure Looms
The new leader will have less time to get ready than previous governors, with Carney leaving June 1 to take over the Bank of England a month later. Flaherty said yesterday the process of finding a replacement is drawing to a close.
Economists surveyed by Bloomberg after Carney announced his departure named Senior Deputy Governor Tiff Macklem as the most likely replacement. The second-most likely candidate is Export Development Canada Chief Executive Officer Stephen Poloz, JPMorgan Chase & Co. said in a March 19 report. The Globe and Mail newspaper said Stanford University finance professor Darrell Duffie is also a candidate.
“The best thing they can do is get this thing announced as soon as possible,” said Michael Gregory, senior economist at Bank of Montreal in Toronto. “The market is still figuring the odds favor Tiff Macklem; the fact it’s taking a little longer leads you to believe what’s going on is something other than the obvious.”
Carney’s replacement will start less than five weeks from today. In comparison, David Dodge was named governor on Dec. 20, 2000, 42 days before his term began, and Carney’s own appointment was announced Oct. 4, 2007, 120 days before he took over.
The central bank has kept its key lending rate at 1 percent since September 2010 in the longest pause since the 1950s, and has said for a year that its bias is to increase borrowing costs while peers such as the U.S. Federal Reserve have bought assets to boost growth. The idea a new governor may drop the bias is one factor holding down Canadian bond yields, said Ian Pollick, RBC Capital Markets senior fixed income strategist.
“It’s going to hang over rates for a little while to come until we get the announcement,” Pollick said in a telephone interview from Toronto, noting that yields on two-year government bonds are below the bank’s 1 percent overnight interest rate target.
The previous two governor appointments have bypassed the senior deputy, with David Dodge moving from the finance department to take the helm in 2001, and again in 2008 with Carney, a former Goldman Sachs Group Inc. banker.
“The last two outsiders -- Dodge and Carney -- were successes, so maybe they want to try again,” said Stephen Gordon, an economics professor at Université Laval in Quebec City.
Under the Bank of Canada Act, the governor must be a Canadian citizen.
Macklem, 51, started at the central bank in 1984 and joined its rate-setting panel in 2004 before being promoted to senior deputy in July 2010. At a January lecture, Macklem said the bank’s monetary policy has been “effective” and keeping it unchanged has been “the right thing to do.”
Poloz, 57, joined EDC, a government trade financing agency, in 1999 as chief economist after three years with Bank Credit Analyst Research in Montreal and 14 years at the central bank in roles that included head of the research department.
Duffie, 58, is a finance professor at California’s Stanford University, and most of his research is related to credit risk and the prices of assets such as derivatives. Duffie earned a doctorate in engineering economic systems from Stanford in 1984, a master’s degree in economic statistics from Australia’s University of New England and a bachelor degree in civil engineering from the University of New Brunswick in 1975.
“Macklem has the qualifications to be the Bank of Canada Governor but the government has said it’s looking at a short list of candidates,” said Avery Shenfeld, chief economist at CIBC World Markets in Toronto.
Flaherty didn’t name any candidates yesterday in Ottawa and declined to say if the announcement is coming today.
“I said that we’re aiming at about the end of April, and we’re about at the end of April, and the process is drawing to a close,” Flaherty said. “It won’t be too long.”