How New Bank of Canada Governor Tiff Macklem Affects Your Money

Who is Tiff Macklem?

Until a few years ago, Tiff Macklem was a BoC lifer, a fact that may have actually hindered his rise to the top job.

The Montreal-born economist spent more than two decades at the central bank. He first joined in 1984 and only left for a few years to pursue a doctorate and take up positions in the government’s Finance Department.

By 2010, he had risen to the role of senior deputy governor, the second-in-command who runs day-to-day affairs.

Yet he was passed over for the role of governor in 2008 and then again in 2013, when Poloz assumed the job. Critics suggested that Macklem, a career civil servant, lacked the private-sector experience of his rivals.

He left the Bank of Canada a few months later to run the University of Toronto’s Rotman School of Management.

Despite his reputation as a mild-mannered policymaker, Macklem has a wealth of contacts throughout the financial world and helped guide Canada through disaster before. It makes sense that the government would call him back to the BoC now.

“Tiff Macklem brings a deep knowledge of the Canadian economy and financial markets,” Minister of Finance Bill Morneau said at a May 1 press conference announcing the appointment.

“He was one of Canada’s leading economic stewards during the 2008 financial crisis, expertise that will serve Canada well as we work to deal with the COVID-19 crisis.”

Macklem acted as liaison to the G7 and G20 countries during the 2008 crisis and helped tighten global regulations and guide the bailout of the major automakers.

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What does his appointment mean for me?

Macklem plans to keep up the BoC’s aggressive stance and “overwhelm” the COVID-19 crisis.

The bank has gone on a shopping spree, buying up large amounts of government debt and taking other measures to inject cash into the financial markets.

“You need to think beyond the normal responses, you need to restore confidence,” Macklem said May 1. “When you look at what the Bank of Canada has done so far ... these are bold, unconventional policy responses that really have embraced this idea that you’ve got to think beyond the normal responses.”

If successful, the bank’s efforts will help keep employers liquid so they don’t have to lay off more staff and also keep inflation under control so your money still has roughly the same buying power it did before the crisis.

The other big lever Macklem has is the BoC’s “target for the overnight rate.”

This benchmark rate influences the prime rate, which big banks and other lenders use to set interest on things like mortgages, car loans and even some credit cards. Cheaper rates encourage people to release their purse strings and keep participating in the economy.

The central bank slashed its benchmark rate three times since the pandemic arrived, leaving it at an incredibly low 0.25% in late March.

While Macklem pledged to get creative with his emergency response, he says he’s still not contemplating negative interest rates — a truly extreme measure that would flip conventional finance on its head.

“There are some disruptive effects of going negative,” Macklem told reporters. “It’s hard to explain to depositors why their deposits are shrinking in their account when they’re not taking any money out. And when you’ve already got a disrupted financial system, you might want to be hesitant about introducing a new source of disruption.”

With interest rates low but unlikely to go any lower, now should be the best time to take advantage.

That could mean grabbing a low-interest personal loan, which you could use to repair your car, consolidate your credit-card debt or pay for everyday expenses during this difficult time.

But the biggest impact will be felt on the biggest loans.

Anyone looking for a home can get a great deal on a mortgage, assuming their credit score is in good shape. And homeowners currently paying 3% or more would be wise to look into how much they could save by refinancing. You could shave a ton of money off your monthly payments.

You can compare rates from more than 30 federally insured lenders using the tool below: