By Kelsey Johnson and Steve Scherer
OTTAWA (Reuters) – Canada on Friday tapped Tiff Macklem, an experienced central banker who has been a leading voice in the country for the transition toward a green economy, as the Bank of Canada’s 10th central bank governor.
Macklem, a former senior deputy at the bank, is taking over for Stephen Poloz, who is retiring next month, at a time when the Canadian economy is headed for one its worst-ever economic slumps due to COVID-19 and low oil prices.
“He 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 had been seen by some market observers as a major contender for the role, particularly if the economy soured, because of his strong understanding of macroeconomics.
The other leading candidate was the current senior deputy governor, Carolyn Wilkins. Macklem held that same position 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:
“Tiff Macklem means the Bank, and its role supporting Canadians, is in solid hands,” Poloz said.
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 has rolled out programs to alleviate stress in the financial markets since the coronavirus started to hit the economy in March.
Also in March, the central bank slashed its overnight interest rate three times in March by a total of 150 basis points to just 0.25%, equaling a record low, as the effect of coronavirus-related shutdowns and falling crude prices started to bite. Poloz said rates are now at their “lower bound.”
During his first press conference, the bespectacled Macklem, 58, said he was “quite comfortable with the effective lower bound where it is,” and he cautioned that the economy would not “snap back to normal” as the coronavirus contagion recedes.
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.”
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.
As market strains ease and some provinces prepare to loosen social distancing restrictions, Macklem could have the opportunity to put his own stamp on the job and pivot to managing rates from managing liquidity, economists have said.
Macklem told reporters on Friday that climate change is a major force in the economy and it will affect prices.
Macklem will take over when Poloz’s term ends on June 2.
(Reporting by Kelsey Johnson and Steve Scherer; additional reporting by Fergal Smith, Moira Warburton, and Denny Thomas in Toronto; Editing by Steve Orlofsky and Nick Zieminski)