OTTAWA (Reuters) - Canada on Friday tapped Tiff Macklem to take the helm of the Bank of Canada, confident the experienced central banker would help the country through a severe economic slump caused by the coronavirus and crashing oil prices.
Macklem, a former senior deputy at the bank, will become Canada’s 10th central bank governor on June 3.
He takes over from Stephen Poloz, who introduced the bank’s first ever large-scale bond-buying program and slashed interest rates to a decade low of 0.25% to alleviate stress in the financial markets caused by the coronavirus outbreak.
Macklem “was one of Canada’s leading economic stewards during the 2008 financial crisis, expertise that will serve Canada well as we work to deal with the COVID-19 crisis,” Finance Minister Bill Morneau said when he announced the appointment.
Macklem, 58, had been seen by some market observers as a major contender for the role, particularly if the economy soured, because of his strong macroeconomics background.
During his first press conference, the bespectacled Macklem said his message to Canadians is that the bank will continue to “provide essential liquidity to the financial system” with the goal to “keep credit flowing,” and he cautioned that the economy would not “snap back to normal” as the coronavirus contagion recedes.
The other leading candidate was the current senior deputy governor, Carolyn Wilkins, who would have been the first female to hold the job. Morneau declined to comment on why she was not chosen.
Macklem held the same position as Wilkins under Poloz’s predecessor, Mark Carney, and was passed over for the position seven years ago.
The last four governors have been brought from outside the central bank. Macklem is currently dean of the University of Toronto’s Rotman School of Management, a top Canadian business school.
“He has been in a policymaker role before so I think that’s a relative positive when we think about the current environment,” said Erik Nelson, a currency strategist at Wells Fargo in New York.
When he was at the bank previously with Carney, “he had a hands-on approach to a lot of the policies that were adopted under the last crisis. And many of those have been adopted this time around,” said Mark Chandler at RBC Capital Markets.
Macklem’s appointment was known only when he walked into a morning news conference with Poloz and Morneau. For Newsmaker:
“It will be interesting to see how his views on monetary policy have changed over the last seven years... We don’t know if he is still as concerned about household leverage as he seemed to be when he was senior deputy under Mark Carney,” said Andrew Kelvin, chief Canada strategist at TD Securities.
Prime Minister Justin Trudeau said that with Macklem, “the Bank of Canada will be well-positioned to help with the economic response and eventual recovery from the COVID-19 pandemic”.
Poloz, 64, has rolled out a series of programs to ease credit and has appeared alongside Morneau in recent weeks as the government and the central bank jointly tried to calm markets and restore confidence. Poloz has said rates are now at their “lower bound.”
“Tiff Macklem means the Bank, and its role supporting Canadians, is in solid hands,” Poloz said.
Macklem caused a brief buzz in the markets when he said the central bank has “the possibility of using negative interest rates” in its framework of unconventional monetary tools, but he then added that in the current situation he is “quite comfortable with the effective lower bound where it is”.
He also praised the “bold” and “unconventional” approach that both the government and the Bank of Canada have taken since coronavirus shut down much of the economy.
In an interview last month, Macklem told Reuters the slump in global oil prices will outlast the coronavirus outbreak and could hammer the Canadian economy for years to come.
On Friday he said climate change is a major force in the economy and it will affect prices.
Macklem could have the opportunity to immediately put his own stamp on the job as the central bank’s response to the coronavirus crisis likely shifts from financial market support to boosting an economic recovery, economists say.
The Bank of Canada is scheduled to make an interest rate announcement on June 3, the day Macklem takes charge. There will be a “transition” period in which Poloz and Macklem will be working together, Morneau said.
Reporting by Kelsey Johnson and Steve Scherer; additional reporting by Fergal Smith, Moira Warburton; Editing by Denny Thomas and Nick Zieminski
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