Stephen Poloz to replace Mark Carney

The Bank of Canada has appointed Stephen S. Poloz as governor for a seven-year term, effective June 3, 2013.

Poloz will succeed Mark Carney, who is leaving the Bank of Canada on June 1, 2013.

At a news conference following his appointment, Poloz said it was “an honour and a privilege to have been chosen as the ninth governor.”

He added, “My passion and my experience through the years, [both] at bank and also at the private sector, are what the key ingredients were to make this a reality.”

Officials say Poloz worked well with the Harper government during the economic crisis in 2008/2009, saying he helped free up financing for Canadian firms working overseas.

People also believe he was one of the candidates for the governor position in 2007 at the time Carney was chosen, though he allegedly lacked sufficient experience at that time.

Poloz gave every indication he intends to follow in Carney’s policy footsteps, including adopting a flexible approach to reaching the 2% inflation target. He’ll also continue the bank’s low interest rate approach. “We aren’t out of the woods yet,” Poloz said of economic conditions in Canada.

He added, “We’re in a recovery mode, but in a recovery that is not as robust as was anticipated.”

“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].”

Poloz pointed out that monetary policy is established by the bank’s governing council as well as the governor. He considers the current stance appropriate.

BMO Capital Markets chief economist Doug Porter says Poloz’s appointment wasn’t a surprise.

“He was the second-most-likely candidate. He’s well known and worked at the Bank of Canada previously, and generally he’s well regarded,” Porter says. “Also, the process to find a replacement for Carney was taking so long that it did seem like it wasn’t just going to be a rubber stamp of the Deputy Senior Governor. People questioned whether it would again be an outsider, and this has now been the case for the third time in a row.”

He adds, “In terms of what will happen with monetary policy…Poloz hasn’t made many public announcements on his views, so it’s tough to gauge his leanings. One thing I would say is his having worked at Export Development Canada [for 14 years] means he’s likely very sensitive to the challenges exporters are facing, especially with the currency close to parity.

“The other thing is because he’s an unknown compared to the status quo choice of [senior deputy governor Tiff Macklem], there’s a bit of uncertainty as far as whether he’ll maintain a steady-as-she-goes policy.” This may have caused the slight softening in the currency markets, with the dollar stepping back two-tenths of a cent.

When asked if Poloz will be as vocal and gain the same international acclaim as Carney, Porter said Poloz certainly has big shoes to fill. But don’t count him out, because “he’s no shrinking violet. He has strong opinions and will prove to be just as public a personality.”

Read: The Mark Carney bubble

To Carney, he says, “Best of luck, you’ll need it.”

Scotiabank’s economists Derek Holt and Dov Zigler say in an analysis, “Markets could take this appointment as a dovish nod in that the government may be placing the emphasis upon Poloz’s strong background in the export sector and hence his understanding of the competitive challenges facing Canadian exporters including an elevated currency.”

But they agree with Porter that Poloz hasn’t spoken publicly about monetary policy, in fact avoiding the subject.

Read: It’s time to be more accountable: Carney

“As such, his views as applied to the conduct of monetary policy are not well known,” Holt and Zigler say. “It is possible that markets will initially treat his appointment as mildly dovish for rates and bearish for CAD, but the strong caution is that Poloz’s initial speeches and MPR will therefore be of heightened interest as his views on monetary policy are such an unknown quantity.”

Laval University economics professor Stephen Gordon tweeted, “Poloz became director of BoC Research around time inflation targeting was adopted. Expect no changes there.”

In a statement, Finance Minister Jim Flaherty praised Poloz’s record and thanked Carney.

A native of Oshawa, Ontario, Poloz graduated from Queen’s University in 1978 with a bachelor’s degree in economics. He received a master’s degree in economics in 1979 and a PhD in economics in 1982, both from the University of Western Ontario. Mr. Poloz first joined the Bank of Canada in 1981, and occupied a range of increasingly senior positions over a fourteen year span, culminating in his appointment as Chief of the Bank’s Research Department in 1992.

Poloz joined Export Development Canada in 1999, serving as chief economist. He took on an additional role, senior vice-president, corporate affairs, in 2004. In 2008, he was promoted again to senior vice-president, financing. Prior to joining EDC, Poloz spent three years with BCA Research in Montreal and 14 years with the Bank of Canada.

He was appointed President and Chief Executive Officer of EDC in January 2011, a position in which he served until his appointment as Governor of the Bank of Canada.

Poloz was named as one the front runners in the campaign to replace Carney, as reported by The Globe and Mail.

Read: Macklem to replace Carney: WSJ poll

Other candidates included Stanford University professor Darrell Duffie, and past and current bank deputies.

The position comes with a salary of between $431,800 and $507,900.