Finance Minister Bill Morneau has appointed Tiff Macklem, the former senior deputy governor of the Bank of Canada, to take over the top job at the central bank as it navigates the uncertainty of a pandemic-driven recession.
Macklem is currently the dean of the Rotman School of Management in Toronto, but had spent decades with the Bank of Canada before starting that appointment.
Macklem began his career at the bank in 1984. He was widely expected to win the contest for bank governor in 2013, but was beaten out by Stephen Poloz, who was then CEO of Export Development Canada.
Poloz’s term ends June 2.
Time of financial uncertainty
The transition to new leadership comes as millions of Canadians have signed up for government aid and companies big and small are relying on federally backed wage subsidies to weather the COVID-19 pandemic.
During Friday’s announcement, Morneau said he’s confident Macklem’s expertise in financial markets will help the central bank navigate an economic crisis never before seen in Canada.
“The bank has to be humble about what it doesn’t know. There’s a lot we don’t know about this disease. There’s a lot that medical experts don’t know about this disease,” Macklem said during his unveiling in Ottawa.
“But the Bank of Canada has tremendous analytic economic financial capacity to analyze what’s going on in the economy, and the important role for the Bank of Canada is to provide Canadians with as much information as it can honestly provide as to what is happening and what the recovery could look like, recognizing that we’re probably going to have to look at more than one scenario.”
In the past months, Poloz and Morneau have appeared at several joint news conferences to show a co-ordinated approach on monetary and fiscal policy to deal with the economic fallout of the pandemic and global oil shocks.
Morneau has announced more than $250 billion in direct financial aid, credit support and tax deferrals to help offset the impact of the COVID-19 pandemic.
Record-low interest rates
Poloz has cut interest rates to a record low of 0.25 per cent, committed the central bank to buying billions in government bonds each week until the economy is in recovery and taken steps to strengthen liquidity in the banking sector.
The person who replaces Poloz will be facing an economy that, according to the bank’s own projections, could shrink by 30 per cent or more in the second quarter.
The next government will have practically no room to use interest rate cuts to help the economy. Poloz has already taken the unprecedented step — in Canada at least — of directly buying government bonds.
That limited flexibility is compounded by the rapid use of the federal government’s fiscal firepower to put a financial floor under Canadian households and businesses.
The parliamentary budget officer said it’s likely the federal deficit for the year will hit $252 billion as a result of the COVID-19 pandemic, and could go even higher if emergency measures remain in place longer than planned.
In selecting Macklem, the government passed over Poloz’s top deputy, Carolyn Wilkins, the first woman to serve as the bank’s senior deputy governor. She would have been the first woman to serve as governor.
Wilkins was viewed by many as the front-runner for the position and would have provided some continuity at the country’s central bank as it navigates the uncertainty of a pandemic-driven recession.