Canada's top banker
Last Updated Jan. 30, 2008
David Dodge (Canadian Press)
When David Dodge was appointed to a seven-year term as Bank of Canada governor in February 2001, it marked a departure in the usual recruitment route. Before Dodge, all governors of the Bank of Canada (except the first) had been plucked from within - specifically, the deputy governor. Not Dodge. While he had served on the bank's board of directors in the 1990s, he had never been its deputy governor.
Dodge did, however, have plenty of experience in the intricacies of high finance.
He was the deputy minister of finance from 1992 to 1997 - a time of huge spending cuts to wrestle down the federal deficit. Before that, he was the department's assistant deputy minister, where he oversaw the implementation of the GST. He has also held senior positions in what was then known as the Central Mortgage and Housing Corporation, the Anti-Inflation Board (where he was director of research), and the Department of Employment and Immigration, where he directed the Labour Market Development Task Force.
Top 5 jobs of the Bank of Canada:
1. Monetary policy - Keeping economy on track by adjusting interest rates to achieve 2 per cent inflation
2. Bank notes - Issuing Canada's paper money bills and redesigning bills to stay ahead of counterfeiters (the governor's and deputy governor's signatures are on each bill)
3. Financial system - Promoting the efficient running of financial systems in Canada and elsewhere
4. Funds management - Acting as the federal government's "fiscal agent," it manages the treasury and foreign-exchange reserves
5. Retail debt services - Runs the Canada Savings Bond program.
Source: The Bank of Canada
A PhD in economics from Princeton and an assistant professorship in economics at Queen's University gave him the academic credentials to tackle the job of the country's top banker - a role that requires him to do a lot of watching, talking, listening and a little tea-leaf reading.
In his first year in office, the economy was noticeably softening and Dodge started cutting rates to provide some stimulus. Then came the 9/11 attacks and financial markets were rattled around the world. The shock threatened to slam the door on growth. Dodge responded with a series of dramatic interest rate cuts that slashed the central bank's key rate to 40-year lows.
He was widely respected by economists in Canada and abroad. But his policy moves weren't always popular at home. He boosted the bank's key lending rate nine times between 2004 and 2006, a period when manufacturers in Central Canada were already struggling with a rapidly appreciating dollar. But he felt rate increases were necessary to keep inflation near the bank's target of two per cent. Core inflation has consistently hovered around that target since early 2003.
There don't seem to be many issues he wouldn't tackle. Harmonizing Canada's currency with the U.S.? He's against it. The record U.S. current-account deficit? The global economy risks an "outright recession" if something isn't done, he says.
Directness was part of his style. When Dodge was first appointed, he pledged to be the most open and accessible governor ever. Dodge feels it's vital that everyone know what the bank is trying to do and why.
"It is absolutely critical for business, governments and even more important that ordinary Canadians understand what it is we're trying to do and to be able to anticipate a little bit what we're trying to do," he said early in his mandate. "If people correctly anticipate what's going to happen, they don't make mistakes."
Dodge has always been careful to make sure that those policy moves are flagged in advance.
"Some modest further increase in the policy interest rate may be required to keep â€| inflation on target over the medium term," read one policy announcement. So everyone knew that interest rates could be going up in the next few months, but likely not by too much.
Which is not to say that David Dodge is all about rates. A 2002 ROB Magazine profile saw him waxing poetic on the merits of crossbreeding cattle at his farm west of Ottawa. Just in case you were wondering.
- Loonie's current level is about right, Dodge says
- Dec. 6, 2007
- Ontario warns Dodge about raising interest rates
- June 20, 2007
- Exporters want lower interest rates to offset loonie's ris
- May 7, 2003
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