OTTAWA – Finance Minister Jim Flaherty has once again named an outsider to take over the critical economic and financial post of Bank of Canada governor, bypassing the institution’s traditional chain of command.
The appointment of Export Development Canada chief executive Stephen Poloz, 57, was a mild surprise when it finally came Thursday afternoon, but would have been regarded a shocker a few months ago.
Until speculation began to build about the long time it was taking to name a successor for the departing Mark Carney, most markets and economists were convinced the job would go to the bank’s second-in-command, Tiff Macklem.
Still, markets — counting on Macklem getting the job to maintain continuity in monetary policy — had a mildly negative reaction to the news, pushing the Canadian dollar 0.2 per cent lower to 99 cents US in after-market trading.
Analyst offered reactions ranging from “mild” to “huge” surprise, and offered several explanations for the choice, including Poloz’s superior private sector experience.
Flaherty refused to compare candidates, but said after an exhaustive search and a “wealth of talent to choose from,” Poloz, 57, emerged as an “excellent choice to lead the Bank of Canada into the future.”
He cited Poloz’s management experience running EDC, an organization of similar size to the Bank of Canada, adding that his position with the agency also brought him in direct working relation with Canada’s corporate sector.
Carney, who is leaving to take over the top job at the Bank of England, also praised his successor.
“It is much easier to leave knowing that an individual as competent and talented as Steve will be coming back to the bank to take over,” Carney said.
A trained economist, Poloz has been president and chief executive at EDC since 2011, joining the Crown corporation in 1999 as vice-president and chief economist. He also spent five years with Montreal-based BCA Research, and 14 years with the Bank of Canada in various capacities.
Macklem, a career public servant, has worked primarily at the bank and in the Finance Department in senior positions.
Poloz was one of three candidates interviewed by the finance minister in recent weeks on the recommendation of the bank’s directors. The identity of the third candidate to make the shortlist was not disclosed.
At a news conference, Poloz called it “an honour and a privilege to have been chosen as the ninth governor” of the bank.
“My passion and my experience through the years, including at the bank but also at the private sector, are what the key ingredients were to make this a reality,” he said.
Poloz is also seen as a team player who worked well with the Harper government during the economic crisis in 2008-09 in helping free up financing for Canadian firms working overseas. He is also thought to have been a candidate in 2007, when Carney was chosen, but at the time was regarded as lacking management experience.
Poloz gave every indication he intends to follow in Carney’s policy footsteps, including adopting a “flexible” approach to reaching the two-per-cent inflation target, and in continuing the bank’s low interest rate approach.
“We aren’t out of the woods yet,” Poloz said of economic conditions.
“We’re in a recovery mode, but in a recovery that is not as robust as was anticipated … and I think we will have to stimulate the economy for a certain amount of time. I don’t know how long, but we will have to assist this process to ensure there is job creation” and growth continues.
Scotiabank economist Derek Holt said one possible interpretation of why Poloz was chosen is that the government “wanted to give a bit of a nod to exporters” in light of the elevated level of the Canadian dollar.
One analyst who spoke on condition of anonymity, said the government may have wanted a less controversial central banker to replace Carney, a media darling who sometimes spoke out on issues not directly related to monetary policy.
Although Poloz’s name had started to circulate prior to the announcement, Bank of Montreal chief economist Doug Porter said the announcement was still enough of a surprise to trigger a market reaction, even if a muted one.
Porter said the markets likely regard Poloz as adding to uncertainty about future monetary policy, and given his experience championing the export sector, might favour a looser approach if it causes the loonie to weaken.
But Poloz pointed out Thursday that monetary policy is established by the bank’s governing council, rather than strictly by the governor, and that he considers the current stance appropriate.
Poloz takes on his new duties starting June 3. According the Bank of Canada website, the 2012 salary of the governor ranges from $431,800 and $507,900.