When current Bank of Canada Governor Mark Carney steps down on June 1 to lead the Bank of England, Stephen Poloz will take the reins of our economic engine. Poloz was a surprise choice to replace the outgoing governor. Although well known in Ottawa, he’s not as widely heard of outside the capital. Some criticize this could work against him as he tries to navigate Canada out of the worse economic slowdown experienced in a generation.
It can be argued that Carney leaves large shoes to fill; his economic and monetary policy is credited with aiding Canada through the financial crisis relatively unscathed. Let’s take a look at what Poloz’s next steps may be.
What Is Poloz’s Background?
Poloz is leaving his job as the president and Chief executive officer of Export Development Canada (EDC) to take the top job at the BoC. He has more than 30 years experience in the private and public sector, including 14 years previous experience with the Bank of Canada during the 1980’s and early 1990’s. Poloz holds a Ph.D as well as an M.A. in economics from Western University, and a B.A. with honours in economics from Queen’s University. He’s a graduate of Columbia University’s Senior Executive Program, and is a Certified International Trade Professional. He’s originally from Oshawa, but now lives in Ottawa. He has two kids and is a grandfather.
How Will he Change the Direction of the BoC?
He probably won’t. By the looks of it, Poloz’s views seem in line with Carney’s policy to keep rates low and proceed with cautious optimism. While the goal is for rates to return to normal levels, both are well aware that raising rates too fast and too soon could result in higher unemployment and unaffordable living conditions for many everyday Canadians.
What Does Canada’s Economy Need?
Poloz has a long, hard road ahead of him. The recession that shook the world in 2008 continues in the form of the EU debt crisis, the U.S. real estate market continues to stall and the cost of living remains high. These are the facts that Poloz has to take in stride. Interest rates remain near record lows, in turn pushing debt levels higher as Canadian consumers scramble for cheap money, choosing to borrow instead of save.
The Challenges to Come
The new Bank of Canada governor has to walk the fine line of eventually raising rates while simultaneously keeping the economic engine moving, and remaining attractive to foreign investors; if rates are too high they won’t be interested. He also has to encourage Canadians to save more and spend less – a message that has largely been ignored thus far, as household income to debt ratios reach toxic levels.
What Should Canadians Do?
Canadians looking to gauge the next steps for the economy should watch Poloz’s initial steps closely. He is already feeling the pressure of raising rates – the C.D. Howe Institute has recommended that he start increasing them as soon as possible.
In the meantime, it’s important to remain diligent about debt payoff, especially higher interest debt, and resist the temptation to take on more.
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