Canada’s New Bank Governor Tackles Economic Chaos

Tiff Macklem, a former senior deputy governor at the Bank of Canada as well as a former dean of the Rotman School of Management, took the top spot at the bank on June 3.

Tiff Macklem

Economic upheaval and uncertainty–especially the kind resulting from the Covid-19 pandemic–demands a steady hand from financial governing bodies as they navigate the chaos. In Canada, the central bank’s previous governor, Stephen Poloz, finished his mandate but was reportedly willing to stay on to assist through the crisis. He wasn’t asked to do so.

Beginning June 3, Tiff Macklem, a former senior deputy governor at the Bank of Canada as well as a former dean of the Rotman School of Management, will take the top spot at the bank.

“This crisis is very different in many respects from the crisis we faced in 2008 and 2009,” said Macklem at his introductory news conference. “In this setting, the financial system can play more of a stabilizing role. I want to underline the bold actions that the Bank of Canada has taken to provide liquidity to the system are being extremely helpful in making sure the system can play that role,” he added, noting the bank’s commitment to restoring confidence.

While Macklem was relatively mum on his future plans for monetary policy, he cautioned against negative interest rates, calling them too disruptive for an already disrupted financial system and adding that he was comfortable with 0.25% being as low as the bank would go. While Canada faces an economy in lockdown similar to the rest of the world, commodities, especially oil, have taken a significant toll on economic growth (or lack thereof). The industry reduced spending by $7 billion and oil sands investment looks to hit its lowest in 15 years, according to consultancy IHS Markit. Spending had already plunged from more than $30 billion in 2014 to under $10 billion last year.

Based upon updated economic scenarios and announced federal measures, the Parliamentary Budget Office of Canada says the budget deficit will increase to almost $25 billion Canadian dollars ($17.9 billion) in the current fiscal year and skyrocket to CA$252 billion in 2020-2021.

In heady times such as these, many expect Macklem to stay the course set by his predecessor. With no official acts of his own yet and a once-in-a-lifetime economic shock to contend with, it appears that Tiff Macklem will begin his tenure in as measured a manner as possible.