Mark Carney is a hard act to follow but the new Bank of Canada Governor Stephen Poloz managed to make a mostly-positive debut at his first public appearance under the watchful eye of government, and economists in this country and around the world.
“Confidence” was the theme of Poloz’s opening statement before the House of Commons Finance Committee, which identified a need to restore the faith of Canadians in pursuing business opportunities following the shake-up of the global financial crisis.
Poloz answered questions from MPs as he presented his economic outlook and envisioned a sequence of events that would lead the country on a path to further prosperity.
“Foreign demand will recover, our exports will strengthen further, confidence will improve, companies will invest to increase capacity, existing companies will expand and new ones will be created,” Poloz said, speculating that this process might already be underway.
“It was a solid first impression,” said Philippe Bergevin, a senior policy analyst with the C.D. Howe Institute.
Bergevin’s main takeaway—and the one that, arguably, everyone else was looking for—was Poloz’s intention to keep the inflation rate at 1 per cent. Poloz described the inflation target as “sacrosanct” to the Bank of Canada, an “anchor” for Canadians’ inflation expectations.
“What came across [were] no imminent changes in the target interest rate. The likelihood of seeing an increase before the second half of 2014 is pretty low,” said Bergevin.
“It clarifies that there’s continuity in terms of targeting inflation and sticking to that mandate.”
Subjects touched upon by Poloz during his speech and the ensuing round of questions also included fostering ties with the emerging economies of India, China, and Brazil, and the growth in household debt among Canadians.
One other notable feature of Poloz’s first appearance, according to TD chief deputy economist Derek Burleton, was a downplaying of any speculation he’ll be looking to target a lower Canadian dollar, given Poloz’s past experience with Export Development Canada.
“One thing I think he wanted to make very clear is that the Bank of Canada, under his stewardship, will continue to allow the Canadian dollar to be driven by market forces,” Burleton added.
Armine Yalnizyan, an economist with the Canadian Centre for Policy Alternatives, commended an “accomplished and impressive” Poloz for a job well done, but was taken aback at one metaphor that presented itself several times throughout the meeting as the new governor fielded questions from MPs.
There’s been mounting concern from some Canadians over “too much chumminess” between the bank and the government, Yalnizyan noted, particularly with the recent passing of Bill C-60, which potentially allows for the federal government to oversee some aspects of hiring for crown corporations.
“Given that backdrop, I was shocked at how frequently he mentioned the great team,” said Yalnizyan, referencing Poloz’s mention of the intersections between the bank, the Ministry of Finance, OSFI, and other organizations.
“Everybody knows that there is an intersect, but the idea that the Bank of Canada’s Governor’s sightline is completely aligned with that of the federal government is completely disconcerting, not reassuring.”
Still, Poloz’s first public impression was favourable, added Yalnizyan, a sentiment echoed loudly by Sprott School of Business professor Ian Lee.
Poloz is an excellent continuation of the media-friendly impression left by previous governor Mark Carney, said Lee.
“Governor Carney redefined the office of the governor of the Bank of Canada,” said Lee, describing the general public persona of previous governors as “monks in the monastery,” speaking in an “econo-geek” language that didn’t often resonate with Canadians at large.
One way of bolstering confidence in the country’s economy is to clearly explain the forces at work in the financial system to Canadians, Poloz noted in his statement, echoing the street-wise attitude often associated with his predecessor.
“He also understands what Carney understood – [the bank] must be more transparent with ordinary Canadians,” said Lee.
“They want to know what these decision makers are doing and why they’re doing it… Poloz is doing the same thing [as Carney], and that’s why he was chosen.”