Bank of Canada Senior Deputy Governor Tiff Macklem has emerged as the front-runner to succeed Mark Carney as head of the central bank as it grapples with slowing growth and record consumer debt levels.
The Bank of Canada said yesterday its board of directors will form a special committee soon to recruit a replacement for Carney, who will take the helm of the Bank of England in July.
Macklem, 51, is “a natural choice,” said Sebastien Lavoie, economist at Montreal-based Laurentian Bank (LB) and former Bank of Canada employee. “He knows his way around in Ottawa, therefore, he is the best candidate for the number one job.”
Carney, 47, will leave the Bank of Canada on June 1 next year, 20 months before his seven-year term expires. His successor will face an economy projected to grow 2 percent next year, the slowest pace since the global financial crisis, according to economists surveyed by Bloomberg.
The Bank of Canada is the only Group of Seven central bank to suggest its next move will be to raise interest rates, and policy makers have said record household debt levels present a risk to the world’s 11th biggest economy.
The next governor must decide whether to return borrowing costs to “normal” levels even as the economy slows, said Don Drummond, former chief economist of the Toronto-Dominion Bank. (TD)
“It’s a challenge on a theoretical level. It’s a question on a technical level,” Drummond, now a professor at Queen’s University in Kingston, Ontario, said yesterday in a telephone interview. “You’ve done everything you’re supposed to do as a monetary policy authority, and it’s not working.”
Policy makers led by Carney and including Macklem have kept the bank’s policy interest rate at 1 percent since September 2010, the longest period of unchanged rates since the 1950s, to spur growth.
Whoever replaces Carney probably won’t change the Bank of Canada’s approach to policy, said Gordon Nixon, chief executive of Toronto-based Royal Bank of Canada. (RY)
“These central banks don’t change direction because they have different personalities, so I’m sure there will be a lot of consistency there,” Nixon said in an interview.
The Bank of Canada has turned to outsiders in making its last two governor appointments. Carney was the surprise choice in 2007 over Senior Deputy Governor Paul Jenkins, who was the consensus of economists. Similarly, David Dodge was a surprise outside choice for Governor in 2000, when most thought then- Senior Deputy Malcolm Knight would get the post.
Potential candidates from outside the bank, according to the Globe and Mail newspaper, include Julie Dickson, the country’s top banking regulator, former head of Canada’s civil service and Bank of Montreal (BMO) vice Chairman Kevin Lynch, and Drummond, who said yesterday he’s not interested.
The bank will revert to promoting from within, according to ten economists surveyed by Bloomberg, who unanimously said that Macklem will be appointed to the top job next year.
While Macklem is the leading candidate, others may include Bank of Canada deputy governors Timothy Lane and Agathe Cote, as well as Jean Boivin, who left the central bank last month to become Flaherty’s adviser on G-20 matters, said Bricklin Dwyer, an economist at BNP Paribas, in an e-mail.
John Johnston, chief strategist at Davis Rea Ltd., also said in a phone interview he expects Macklem to be the next governor. “He has experience in finance and he’s an extremely smart guy,” said Johnston, who helps oversee about C$575 million ($579 million) of assets for the Toronto-based investment firm.
Those views were echoed by Adrian Miller, a fixed-income strategist at GMP Securities LLC in New York. “It would be an easy step for the bank and the finance ministry to move him into place given his similar views and position on monetary policy and the regulatory environment,” Miller said by e-mail.
Macklem was named Senior Deputy Governor in July 2010. he joined the Bank of Canada in 1984 and rose to the post of adviser to the governor in 2003. Macklem also worked at the department of finance as associate deputy finance minister.
A Bank of Canada spokesman declined to comment on potential candidates to succeed Carney.
To contact the reporters on this story: Andrew Mayeda in Ottawa at firstname.lastname@example.org; Ilan Kolet in Ottawa at email@example.com
To contact the editor responsible for this story: Chris Wellisz at firstname.lastname@example.org