Stephen Poloz, the head of Export Development Canada, has been named the new governor of the Bank of Canada.
Finance Minister Jim Flaherty made the announcement in Ottawa Thursday afternoon, surprising many observers by passing over the odds-on favourite for the job, BoC Deputy Governor Tiff Macklem.
Poloz, 57, is not well known outside of Ottawa. The fact the government chose someone from outside the Bank has led some to speculate that the Harper government is looking for greater influence over monetary policy, the Globe and Mail reports.
The choice could have an impact on markets and the loonie Friday morning, as speculators had priced in the prospect that Macklem would be named to head the Bank.
Poloz takes the reins on June 3. He replaces Mark Carney, who is leaving the job on June 1, to take up a position as head of the Bank of England.
The bank's board of directors said Thursday that it determined Poloz was the best person for the job following an "exhaustive domestic and international search for candidates."
"Mr. Poloz has significant knowledge of financial markets and monetary policy issues and extensive management experience. We are confident Mr. Poloz will make an outstanding contribution to the work of the Bank and uphold its reputation as a leading central bank, ”said David Laidley, Chair of the Special Committee of the Board of Directors.
Poloz graduated from Queen's University with a bachelor's degree in economics. He also holds a Master's degree and PhD in economics, both from the University of Western Ontario.
He spent 14 years with the Bank of Canada, in a range of senior positions and was appointed as chief of the bank's research department in 1992. Poloz joined the EDC as chief economist in 1992 and has served as its CEO since January, 2011.
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I love Randall from Reuters! So, Poloz, where are you on inflation targeting?
Flaherty stuns Bay Street, names Poloz as Carney’s replacement as BoC governor. http://t.co/BTmZMaQUF0 #cdnpoli
As head of EDC, Poloz has insight into the impact of persistently low interest rates on the loonie and the country's manufacturing and export centres.
Despite the widespread surprise at the appointment, Paul Ashworth, chief economist of North America at Capital Economics, believes the appointment will not have any obvious implications for monetary policy. Poloz was widely considered the second favourite in the race, he said.
"He spent the first 14 years of his career rising (rapidly) up the ranks within the Bank of Canada, so he knows the institution from the ground up," Ashworth.
"We don't anticipate that Poloz will be looking to alter the Bank's mandate in any way and wouldn't anticipate any major shift in how the Bank sets policy. Mark Carney's departure is a loss but, in our opinion, markets tend to get a bit over-excited about changes in central bank chiefs."
In a note Thursday afternoon, CIBC economists Benjamin Tal and Emanuella Enenajor suggest that Flaherty chose Poloz because he may have been looking for someone "with more experience with dealing directly with the private sector."
The bank may have a new governor, he said, but it still faces the same challenges: weak growth in the U.S, Canada's closest trading partner, a downturn in the housing market, dangerously high household debt levels and "uncomfortably" low inflation.
"The Bank is still clinging to its tightening bias, but we suspect that will be dropped soon and we still think that the next move in rates is more likely to be down than up," he said.
Carney departs the Bank of Canada with a stellar reputation — he is widely considered the best central banker in the world. But in recent months, with Canada's economy stumbling, some have questioned whether his decision to leave interest rates at emergency lows for four years may have caused asset bubbles in some sectors of the economy, such as housing, and prompted Canadians to take on too much debt.
A prominent analyst, looking at Canada's household debt levels, recently quipped that Carney may be leaving the country at just the right time.
— With files from Sunny Freeman and Daniel Tencer