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‘Try to overwhelm it’: Bank of Canada governor reflects on navigating a COVID-19 economy

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Whenever Tiff Macklem needs a break, he jumps on the exercise bicycle he bought during the pandemic and does a hard workout to clear his mind.

The bike has helped the Bank of Canada governor get through this crisis, one where he could be forgiven for feeling like he’s riding precariously atop a penny-farthing.

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Speaking to The Canadian Press this week, Macklem reflected briefly on his first year as the head of the central bank, and some early lessons from the pandemic.

One year ago, Macklem took over from Stephen Poloz as governor as the country was emerging from the first wave of COVID-19 and public health experts were warning of more, potentially worse, waves to come.

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As Macklem noted, at the time there were more than two million unemployed Canadians, inflation was well below the bank’s comfort zone, and though vaccines were being developed no one knew when they would be available or how effective they would be.

The federal government was poring out billions in unprecedented spending to provide aid to hard-hit workers and businesses, while the central bank had dropped its key policy rate to near-zero to prod spending and was buying bonds to keep markets working and add further stimulus into the economy.

The Bank of Canada this week held its trendsetting rate at 0.25 per cent, saying it still didn’t see the economy being ready for a rate increase until the second half of next year. It did, however, further scale back the pace of its bond purchases, citing improving conditions and the economic outlook.

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Read more: Bank of Canada holds key interest rate at 0.25%, cuts growth forecast for 2021

Macklem said the actions, including his comments last July that rates would stay low until the crisis was fully in the rear-view mirror, were the result of lessons learned from the global financial crisis, which Macklem saw first-hand while he was second-in-command at the Bank of Canada.

“When you’re hit with a true crisis, you need to try to overwhelm it. You need an overwhelming response, you have to step beyond the normal responses,” he said.

The help from the bank and governments have been key to helping workers and businesses become more resourceful and the economy more resilient to subsequent waves of COVID-19, Macklem said.

Of course, Macklem has had to pedal a tandem bicycle by himself since Carolyn Wilkins resigned as senior deputy governor in December. Her replacement, Carolyn Rogers, won’t join the central bank as Macklem’s No. 2 until Dec. 15.

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The other lesson learned through the pandemic is the need for every part of the system — governments, the central bank, and even front-line health workers — to play their role in dealing with the crisis, he said.

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“You can’t have a healthy economy without healthy individuals. It starts there,” Macklem said.

“We each have our roles, we each have our training, we need to do what we need to do based on our responsibilities, but we also need to come together and work effectively on behalf of Canadians.”

Keeping in touch with the concerns of the average Canadian is not easy in the best of times for someone in Macklem’s position, but he said the move to virtual meetings has made it easier to reach people quickly in different parts of the country.

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In some ways, it’s a bit like how he described his life as dean of the Rotman School of Management at the University of Toronto just before returning to the bank last year. He could move through a building teeming with students brimming with questions and ideas.

It was a broadening experience, Macklem said, and one where he could see impacts in a short period of time as students graduated after a few years. Policy-making, he said, is a little more abstract and without the personal connection he had at the university.

“I am really looking forward to going back to more in-person experiences,” Macklem said, “but I think there are some enduring lessons that we can take from this and how you can engage in a big country, and do a better job of engaging with the full diversity of Canadians.”

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