Incoming Governor of Bank of Canada has a stop-start recovery after the blockade By Reuters

By Fergal Smith and Steve Scherer

TORONTO / OTTAWA (Reuters) – Newly appointed Governor of the Bank of Canada, Tiff Macklem, predicted a slow economic recovery in an exclusive interview before his appointment, suggesting that he will continue the business. flexible central bank monetary policy approach.

Macklem spoke to Reuters in a lengthy interview on April 9. He has not spoken of future policy changes since his appointment on May 1 for a seven-year term starting on June 3.

"Expect setbacks," said Macklem of the resumption less than a month before his appointment. "It could be stop-start … it's not going to be a quick return to normal."

Prime Minister Justin Trudeau warned on Saturday that if the provinces move too quickly to reopen their economies, a second wave of the coronavirus pandemic could force the country to "return to prison this summer".

"I hope there will be economic damage and that there will be a need for some more traditional types of stimulus," Macklem said in April. "The top of this list would be infrastructure spending."

Macklem does not establish fiscal policy, but held a managerial position in the finance department during the global financial crisis of 2008-2009 and chaired a group of experts in sustainable finance for government liberal Trudeau.

BMO Capital Markets chief economist Doug Porter said that with interest rates near zero and high budget deficits, "we're going to need some pretty close cooperation between fiscal and monetary policy, at least for next year, if not for the next few years. "

Canada's budget regulator estimates the budget deficit has increased more than C $ 250 billion in the current fiscal year, while the Bank of Canada has cut interest rates 0.25% interest and launched a large-scale asset purchase program for the first time.

"MARK CARNEY-LIKE"

Economists claim that Macklem, who was deputy governor of the Central Bank of Canada when the influential former Governor of the Bank of England, Mark Carney, was the governor, is more likely to increase the size of asset purchases rather than adopting negative interest rates. if the central bank sees the need for further relief.

Once the recovery begins, the bank could introduce a conditional commitment to keep the interest rate low overnight for a long time, a move favored by Carney in the 2008-2009 crisis and resist pressure. on increasing borrowing costs by setting a long-term interest rate target.

"Mr. Macklem brings to the bank many capabilities similar to those of Mark Carney," said Karl Schamotta, chief market strategist at Cambridge. Global payments (NEW YORK STOCK MARKET :). "His international relations give him insight and influence on developments in other areas of the global financial system."

The collapse in oil prices has exacerbated the impact of the coronavirus crisis on the Canadian economy linked to commodities, with the central bank forecasting a contraction in production of up to 30% in the second quarter compared to its level at the end of 2019.