Whether Wilkins, Macklem or a dark horse, next Bank of Canada chief can make own mark

By Fergal Smith TORONTO (Reuters) - The next governor of the Bank of Canada has room to make an immediate impact on monetary policy, economists say, as the central bank's response to the coronavirus crisis likely shifts from financial market support to boosting economic recovery.

Reuters April 29, 2020 00:07:29 IST
Whether Wilkins, Macklem or a dark horse, next Bank of Canada chief can make own mark

Whether Wilkins Macklem or a dark horse next Bank of Canada chief can make own mark

By Fergal Smith

TORONTO (Reuters) - The next governor of the Bank of Canada has room to make an immediate impact on monetary policy, economists say, as the central bank's response to the coronavirus crisis likely shifts from financial market support to boosting economic recovery.

With the start of the new governor's seven-year tenure on June 3, the appointment is likely to come very soon. The bank's board of directors oversees the selection process, but the finance minister and the prime minister have the final say.

Current Bank of Canada Governor Stephen Poloz has had his hands full since March rolling out programs to alleviate financial market stress. But as market strains ease and some provinces make plans to loosen social distancing restrictions, the central bank could pivot to managing rates from managing liquidity.

While some have speculated that Poloz's tenure could be extended amid the coronavirus outbreak, he has said his retirement plans have not changed. [nL8N2BO6RB]

Market players see Bank of Canada Senior Deputy Governor Carolyn Wilkins as the front-runner, while Tiff Macklem, a former senior deputy governor and now dean of a top Canadian business school, is another leading candidate. [nL2N2CB1LE]

"Poloz has left a lot of tools unused so far," said Royce Mendes, a senior economist at CIBC Capital Markets. "Even though he has taken unprecedented actions, there is scope for the new leader to put their stamp on it in different ways."

New measures could include promising to hold the benchmark overnight interest rate near zero for a long period and setting a target for long-term rates. That target could be the 5-year bond yield, which helps determine the rate on the majority of mortgages.

Interest rate targeting is the appropriate policy "when you move from damage control to recovery," Mendes said.

The new governor also will decide how the central bank's asset purchase program evolves.

Strategists at TD Securities, including Andrew Kelvin, estimate purchases will reach C$500 billion, equal to more than 20% of the economy, over the next two years as economic damage mounts.

The bulk is seen in government debt. That could help Ottawa finance a ballooning deficit, projected by TD at C$250 billion for the current fiscal year.

"They may not want to talk about targeting rates... but at the end of the day if they wind up buying C$40 billion of bonds in the 10-year area, that is going to have an impact on rates," Kelvin said.

(Reporting by Fergal Smith; Editing by Dan Grebler)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.