OTTAWA (Reuters) - The Bank of Canada named a veteran insider as a deputy governor on Friday, bringing on board an economist reputed to have strong international and exchange rate expertise in time for the bank’s next interest rate decision.
John Murray, a Princeton University graduate who has been an advisor to the governor since 2000, joins the bank’s six-person governing council immediately.
That means he will have a say in the bank’s January 22 rate decision, the final one under the leadership of Governor David Dodge.
Dodge hands over the reins on February 1 to Mark Carney, a former Department of Finance official and Goldman Sachs banker.
Murray is well known to economists in both academic and market circles and is seen bringing specialized knowledge on exchange rate policy to the table at a time when the Canadian dollar’s rise has led exporters to call for an easing of monetary policy.
“In terms of his specialization, he’s got a lot of experience on international matters and the exchange rate in particular,” said Doug Porter, deputy chief economist at BMO Capital Markets.
“I think that’s his real strong suit and given the massive movement on the Canadian dollar over the past year, that obviously is an important focus of the bank’s policy in the year ahead,” he said.
The bank cut its overnight lending rate by one-quarter point on December 4 to 4.25 percent on expectations that Canada’s economy would be hurt by the U.S. subprime mortgage crisis and financial market distress.
Whether Murray leans toward cutting rates further or holding them steady in January is a mystery. In any case, the views of individual deputy governors is downplayed under the Bank of Canada’s consensus decision-making system, unlike the system at the U.S. Federal Reserve.
Murray has gained a lot of exposure at meetings of the International Monetary Fund and the Bank of International Settlements, where he often accompanies Dodge.
He fills a a vacancy left by Tiff Macklem, who gave up his deputy governor post last October to become associate deputy minister of finance.
Murray first joined the bank in 1980, has a PhD in economics from Princeton University, and lectured there from 1985 to 1986. The Toronto-born economist has also taught at the University of British Columbia and the University of North Carolina.
His cautious, academic approach to policy-making and his almost 30 years of central bank service may provide balance to Carney, a 42-year-old more familiar with the snap decisions made in financial markets.
“If anything, the surprise is that he wasn’t made a deputy governor earlier,” Porter said.
Murray joins the governing council’s existing members who are Dodge, Senior Deputy Governor Paul Jenkins and Deputy Governors Sheryl Kennedy, Pierre Duguay and David Longworth.
Editing by Peter Galloway