Expect more of the same from Mark Carney's replacement

The interest rate will stay low.

(Photo: Deborah Baic/The Globe and Mail/CP)

(Photo: Deborah Baic/The Globe and Mail/CP)

On May 2, in the national press gallery in Ottawa, the Bank of Canada unveiled its new governor: Stephen Poloz, an economist, and president and CEO of Export Development Canada. The 57-year-old replaces Mark Carney, who is leaving his post this summer to take up the equivalent job in the U.K. But while there will soon be a new name on the office door, don’t expect a big change from the new governor when it comes to policy.

Poloz’s appointment was as stunning as it gets in the staid world of monetary policy—which is to say it was a mild surprise. He was on virtually every shortlist for the job. But most expected Tiff Macklem, Carney’s chief deputy, to get the nod.

Macklem was the favourite to replace Carney, a popular and highly prominent governor, not least because he would have been expected to carry on the path set by his boss. By choosing an outsider, some wondered whether the bank—and the federal government—was now signalling a big shift to come.

Poloz, though, is as close to an insider as an outside candidate can be. As a PhD student at the University of Western Ontario, he dreamed of someday becoming chairman of the central bank. After graduating, he spent the first 14 years of his career working toward that goal, rising to head of research at the Bank of Canada, before leaving for a short tenure in the private sector. Since 1999, Poloz has been at Export Development Canada, where he was appointed to the top job in 2011.

At the press conference announcing his appointment, Poloz took pains to praise the outgoing regime. Carney—and the rest of the bank—“played an absolutely critical role in Canada’s performance through the [financial] crisis,” he said. Given those warm words, few analysts expect him to push for radical change, on interest rates or anything else, in the short term. Under Carney, the bank has left the overnight rate steady since 2010, the longest unchanged stretch since the 1950s. Most expect that to continue. “Best bets for now are that the Bank of Canada will be out of action until hiking rates some time in the first half of 2015,” CIBC analysts Benjamin Tal and Emanuella Eneajor wrote in a note.

On the dollar, which has flirted and sometimes exceeded parity with the U.S. dollar since 2009, those expecting a revolution are also likely to be disappointed. As head of Export Development Canada, Poloz undoubtedly heard from his share of CEOs hurt by a high loonie. But nothing he said at EDC signalled that bringing the dollar down was a particular priority for him. Instead, in interview after interview, Poloz praised Canadians for taking advantage of the high dollar to build their businesses abroad, and downplayed the idea that a strong dollar would gut manufacturing at home.

“The concern might be, because he’s been involved in promoting Canadian exports, he would favour a lower Canadian dollar,” says Paul Ferley, assistant chief economist at RBC. “But that’s not the way Poloz is going to conduct policy.”