IMF lowers growth prediction for Canadian GDP in 2016 and 2017

Although the Canadian economy had a fast start this year the International Monetary Fund(IMF) has reduced its growth forecast. The IMF cited continuing damage to the energy sector and lower expected growth globally as reasons for the reduced prospects.

The IMF cut its projection for Canadian gross domestic product (GDP) growth to 1.5 percent in 2016. In the previous prediction last quarter in January, the outlook was for 1.7 percent. The outlook for 2017 was reduced from 2.1 percent to 1.9 percent. The IMF said commodity-exporting economies suffered from reduced income and reduced investment. In Canada, the energy sector was a drag, only partially offset by a lower loonie and an expected increase in public investment by the Liberal government.

This is the sixth straight quarter that the IMF has reduced part of its two-year Canadian GDP outlook. The decline in our growth outlook has reflected the slump in prices for commodities. The Bank of Canada also predicted lower growth in Canada in a January report at 1.4 percent. Private-sector economists have a rosier projection of our growth at least during the first quarter this year. They think that our growth was close to 3 percent on an annualized basis and expect our growth to be close to 2 percent for the year. The Bank of Canada's projection for the year in January was 2.4 percent well above that of the IMF.

The CIBC's most recent forecast for 2016 was at 3.2 percent, down from 3.4 percent in January and 3.8 percent a year ago. For 2017 it forecast growth at 3.5 percent down marginally from its January forecast of 3.6 percent.

The Organization for Economic Co-operation and Develoment (OECD) also downgraded its estimates for the growth in the Canadian Economy as well as those for other G7 countries. The OECD predicted that Canada's economy will grow by 1.4 percent this year and 2.2 percent in 2017.

The global outlook also was for weaker growth according to the IMF report:“Global recovery continues, but at an ever-slowing and increasingly fragile pace. The months since the last World Economic Outlook have seen a renewed episode of global asset market volatility, some loss of growth momentum in the advanced economies, and continuing headwinds for emerging market economies and lower-income countries...Consecutive downgrades of future economic prospects carry the risk of a world economy that reaches stalling speed and falls into widespread secular stagnation.”The report did note, however, that conditions had improved somewhat since earlier in the year. Oil prices were somewhat firmer, and capital outflows from China were lower, and some decisions by central banks were helping to improve sentiment about economic growth but downside risks remained. The IMF World Econonomic Outlook is released just prior to the spring meetings of the IMF and World Bank to take place in Washington April 15 to 17.

OECD lowers growth outlook for Canadian economy

The Organization for Economic Co-operation and Development (OECD) has predicted a lower growth rate in Canada. From a 2 percent growth rate predicted earlier, the OECD now predicts a rate of only 1.4 percent.

While the decline was the steepest of any in the countries looked at, it was still a better performance than that of France or even Germany. The OECD warned of significant risks to financial stability that extended across borders. It also pushed politicians to remove the burden of producing stimulus from central banks. While Canada's growth is behind that of the U.S. at 2 percent and the UK at 2.1 percent, it is still better than Italy or Japan, or as mentioned, France and Germany. The U.S. and Germany suffered downgrades of one half percentage point each. In 2017 Germany is now expected to grow by 1.7 percent and the US 2.2 percent in 2017. Canada's growth rate in 2015 was just 1.2 percent, so 2016 is still predicted to be slightly better. The CIBC had predicted Canada's growth at 1.3 percent this year close to the OECD estimate.

The Paris-based OECD also cut the rate of global growth from 3.3 percent to 3.0 percent. This will make global growth this year no better than last, which was the slowest in five years. The OECD urged leaders to use all the levers at hand to stimulate economic growth. The group noted that using monetary policy alone as the sole tool for stimulus did not work well: "Monetary policy cannot work alone. A stronger collective policy response is needed to strengthen demand." The group suggested exactly what the Canadian government plans, more investment in infrastucture projects.

The outlook for China's growth was unchanged at 6.5 percent in 2016 and 6.2 percent in 2017. Among emerging economies, Brazil was doing very poorly, with the economy shrinking by 4 percent this year. One bright spot was India where the outlook was raised from 7.3 to 7.4 this year. However, for next year the growth rate was lowered slightly from 7.4 to 7.3, still greater than Chinese growth.

The OECD singled out Canada and other economies reliant upon commodity exports as showing the worst effects from the global economic slowdown that appears to be underway. Catherine Mann,, the OECD chief economist said: "Trade and investment are weak. Sluggish demand is leading to low inflation and inadequate wage and employment growth." Global trade and investment is also weak according to the OECD report.

The low prices of oil and other commodities have hurt the Canadian economy in recent months. Ottawa has responded to the downturn by promising considerable expenditures of new infrastructure projects, a move that will lead to a considerable deficit. Nevertheless, deficit spending is recommended by the OECD and many economists as a way to stimulate the economy. The Bank of Canada forecast is also for 1.4 percent Canadian growth this year but is slightly more optimistic than the OECD with a 2.4 estimate for growth next year.

Canada's GDP growth downgraded by International Monetary Fund

The International Monetary Fund (IMF) now predicts a lower growth rate for Canada in 2015. Last month the Organization for Economic Cooperation and Development (OECD) also predicted lower growth rates for Canada this year.

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The IMF now projects the growth in GDP for Canada this year at only 1.5 percent. In April the IMF predicted a growth rate of 2.2 percent. The U.S. rate is now predicted to grow at a 2.5 percent rate but that is also down from 3.1 percent earlier. The EU growth rate is predicted at the same rate as Canada 1.5 percent in spite of problems with Greece. The rate is unchanged from the April prediction.

The OECD had predicted a Canadian growth rate of 2.2 percent in March but reduced this to 1.5 percent in June. The decline in oil prices, negative growth in the first quarter, and sluggish pace of new investments all contributed to the reduced growth prediction. Some are predicting that there will be a recession in Canada. While many admit there may be a technical recession, that is two consecutive quarters of negative growth, many see this as a "soft patch" with no sustained broad-based decline in economic activity. Much of the distress in the Canadian economy is focused on the energy sector. Randall Bartlett TD Bank senior economist commented: "It is likely that the Canadian economy was in recession in the first half of the year. It is commonplace to define a recession as two consecutive quarters of negative real GDP growth and output now looks to have fallen by about 1.0% in Q1 and 0.6% in Q2. The second half of the year is also likely to be weaker than previously expected, reducing annual real GDP growth to around 1.2% in 2015. This would mark the weakest pace of real GDP growth outside of a recession in over 20 years,"This view contrasts with that of Doug Porter of the BMO: "What we’re seeing right now is weakness in the energy sector… at the moment it’s not spreading much beyond that.”

The IMF claims reduced spending in the energy sector is one of the main reasons it has reduced it economic growth prediction for Canada. While the price has recovered, in the last few days prices have turned downward again. Since last summer the price of oil has seen a huge 40 percent decline. In provinces such as Alberta that are highly dependent on the energy sector, there has been considerable belt tightening and reduction in investment. The new NDP government will see declining revenues. In spite of the leftist reputation of the NDP, the new government has been attempting to develop good relations with the oil patch. Premier Rachel Notley stresses the importance for Alberta of the development of the Oil Sands.

Many economists believe that the Bank of Canada will cut interest rates further after its surprise cut in January of this year. While the IMF sees slower growth this year, it predicts an improved growth rate of 2.1 percent for 2016.

This rate will still be well below predicted global growth of 3.8 per cent for 2016. Global growth for this year is judged to be 3.3 percent. Canada is well below that, as are many developed economies.

Bank of Canada leaves overnight interest rate at 0.75 per cent

The Bank of Canada announced that it will be maintaining the overnight interest rate at a low 0.75. The bank rate will be one per cent and the rate on deposits 0.50 per cent.

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Total Consumer Price Index(CPI), according to the Bank, rose just one percent even though core inflation has remained near 2 percent for the last few months. The lower CPI rate is the result of the sharp drop in energy prices. The drop in the value of the dollar, increasing the cost of U.S. imports, has offset other factors that might reduce prices.

During the first quarter of this year, the Canadian economy has stopped growing due to damage caused by the decline in oil prices and its negative effect on the oil production sector.The Bank statement said:“The impact of the oil price shock on growth will be more front-loaded than predicted in January, but not larger. The ultimate size of this impact will need to be monitored closely.” The Bank predicts that the remaining quarters will see a rebound due to low interest rates, and the positive effect that lower dollar will have on exports. While the lower dollar helps exporters in that their products may be cheaper in countries such as the US, the higher prices for imported machines and materials used in production may partially offset these gains in some cases. The Bank has decided not to lower interest rates further as it did in January this year.

Stephen Poloz, the Bank of Canada Governor said: "By the middle of the year we should be seeing only the good stuff." However the statement also contained a number of warnings about the road ahead including the slow pace of business investment, and falling prices for Canadian commodity exports including oil, natural gas, lumber, hogs and iron ore.

For the entire year, the Bank predicts a growth rate of 1.9 per cent, down from the forecast of 2.1 per cent predicted in January. After no growth this quarter, the growth rate will be 1.8 per cent, 2.8 per cent and 2.5 per cent over the following three quarters on an annualized basis. Given the relatively slow growth rate, many economists expect that the Bank could very well cut rates again before raising them next year. Economist, David Madani, of Capital Economics insisted that it was "pure fantasy" if the Bank believes that economy will rebound as quickly as it predicts unless there is even more interest rate relief. However, the Bank sees the current rates as appropriate at least for now. If growth remains relatively sluggish Poloz may decide to lower rates once again as some predict. The Canadian dollar reacted positively to the Poloz announcement, increasing in value relative to the US dollar.

Loonie takes a dive after Bank of Canada cuts interest rate

After Canada's central bank, the Bank of Canada, cut the bank rate from 1.0 percent to .75 percent, the Canadian dollar, the loonie, fell to its lowest level against the US dollar since 2011.

This morning, January 23, the loonie was still trading below 81 cents to the US dollar. The Bank of Canada rate cut caught markets by surprise as no economists had been predicting the drop at this time, although many were beginning to see a drop later in the year if economic growth remained sluggish. A statement from the bank said: “This decision is in response to the recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada, The bank's policy action is intended to provide insurance against these risks, support the sectoral adjustment needed to strengthen investment and growth, and bring the Canadian economy back to full capacity and inflation to target within the projected horizon." The rate drop was made as both the bank and the IMF predicted lower growth in Canada in 2015. The sudden drop was no doubt part of the reason the loonie's value declined so quickly.

Many of Canada's exporting companies will benefit from the lowered value of the dollar. American companies buying from Canadian companies will find that their dollar buys more as the US dollar strengthens and the Canadian dollar is worth less. The lower loonie is a mixed blessing though as Canadian consumers will have to pay more for imported U.S. goods. The move to quantitative easing in the EU also drove down the value of the Euro. It would seem that there may be moves in many countries to cut the value of their currencies so as to improve their export positions.

 The U.S. dollar at the same time is remaining quite strong. This will be a great boon for U.S. consumers as imports will be cheap. U.S. exporters may find that there is less demand for some of their goods as they will be higher in price than those of foreign competitors. Sebastien Galy of Societe Generale said: "The Bank of Canada has taken the bull by the horn deciding to target a weaker CAD. It is a surprise so early but indicates the emphasis on adjusting the CAD for a very sharp reversal in its terms of trade gains since 2002 (oil)." While Greg Moore, of RBC Dominion Securities, did not think that the bank head, Stephen Poloz, deliberately attempted to weaken the loonie further, he admitted that Poloz did see a lower currency as an important part of the recovery. Galy expects that the loonie will reach 80 cents and perhaps even 78 cents.

Lower currency prices are not necessarily a boon for a country. The fall in value of the ruble is a disaster for Russia. While it makes exports cheaper, as the price of a main export oil tumbles and it faces economic sanctions, economic growth slows and costs of imports soar. Countries such as China reap an economic windfall as the prices of its gas and oil imports from Russia drop. The U.S. does not complain about the precipitous drop in the value of the Russian ruble. On the other hand, the US constantly complains that China continues to keep the value of its currency low to make its exports more competitive. Even last April, the US was still making noises about Chinese currency manipulation: However, the Treasury expressed concern about recent reports of Beijing's "heavy intervention" to keep the value of the currency low to gain trade advantages. A weaker yuan makes Chinese goods cheaper for Americans and makes U.S. goods more expensive for Chinese, giving an advantage to Chinese exporters. So far, there have been no complaints about the Canadian move. In the case of Canada the lower dollar will make the raw materials that are among the prime exports of Canada to the US cheaper so the move helps the U.S., but imports from China are mainly manufactured goods I would expect.

 Other exporting countries such as Australia may decide to follow the Canadian example to lower the value of their currencies to remain competitive globally and increase exports. Shares of exporters, such as West Fraser Timber Co. climbed after the rate cut and the fall of the loonie. The TSX index rose 1.8 percent after the cut as well. Some exporters price their goods in US dollars. David Garofalo, CEO of HudBay Minerals Inc. said: “For companies like ourselves that have operating costs denominated in Canadian dollars and revenues in U.S. dollars, it is a win.” For U.S. retailers close to the Canadian border who benefit from increased Canadian shopping the fall in the loonie will be a definite loss.

Bank of Canada surprises markets with rate drop

In a surprise move, Canada's central bank, the Bank of Canada, reduced the overnight lending rate by a quarter of a percentage point. The reason given was the threat to the economy of plunging oil prices.

The move by the Bank reduced the lending rate from 1.0 percent to 0.75 percent. The Bank governor Stephen Poloz said: "The drop in oil prices is unambiguously negative for the Canadian economy. Canada's income from oil exports will be reduced, and investment and employment in the energy sector are already being cut." While the overall effect of the drop in oil prices may be negative, the impact will vary from province to province. With its huge oil resources, Alberta will suffer a significant drop in income from royalties and a decline in economic activity in the oil patch, but other provinces with industries that use oil welcome the lower prices for inputs. Consumers, airlines, truckers, and cabbies will be cheering the downward trend in fuel prices.

 The Toronto Stock Market (TSX) was up almost 300 points not long after the announcement. No doubt the reduced rate will be expected to boost consumer demand and help raise the level of economic activity. Almost no economists had been predicting the rate cut at this time but more were suggesting it could happen in the future. 

The rate decrease, follows upon a recent downgrading of both global growth and Canadian growth in the World Economic Outlook for 2015 published by the IMF. The forecast reduced global growth rates by 0.3 percent to 3.5 percent in 2015 and 3.7 percent in 2016. Canada's growth was downgraded 0.1 percent to 2.3 percent for 2015 and even more 0.3 percent for 2016 to just 2.1 percent. The drop in oil prices by about 50 percent since September 2014 was cited as the main reason for the IMF downgrade. In June of last year oil was at $105 US a barrel but now is well below $50 a barrel. The Bank of Canada also downgraded its prediction for Canada's growth in 2015 from 2.4 percent to 2.1 percent even lower than the IMF prediction, although contrary to the IMF, it sees a rise to 2.4 percent in 2016. 

The Bank made its projection on the assumption that oil prices will average about $60 dollars a barrel over the next two years. Derek Burleton, an economist at TD Bank said: "It is a significant move. It does show the Bank of Canada is worried about the big drop in the price of oil ... and what kind of uncertainty that poses in the next few quarters. I don't think they are panicking but I do think they're concerned about some of the uncertainty the recent slump in the price of oil does create for the economy." BMO economist, Michael Gregory, said: "Today’s BoC rate cut smacks of being a one-time 'insurance' move but in his presser, Governor Poloz indicated that if the world changes again (adversely for Canada) the Bank could take out more insurance."  

The Bank predicts that the lower oil and energy prices will reduce inflation at least temporarily but over the projected two year period will again approach the target two percent level. The Canadian dollar, the loonie, is trending much lower. BNN reports: Charles St-Arnaud, senior economist at Nomura Securities International Inc., said the drop in crude will prompt the central bank to lower its growth forecast by 0.5 percent.The loonie depreciated 1.4 percent to $82.55 cents US in Toronto Tuesday, at one point touching its weakest level since April 2009. Nomura forecasts it will reach 80 cents US by the middle of the year. The lower loonie will help Canadian exporters but imports from the US will rise in price and the flow of shoppers across the border may slow considerably as the loonie declines in value against the US dollar.

Canadian 12 year old criticizes Canadian banking system

A video of Victoria's talk at a recent conference of the Public Banking Institute in Philadelphia has been posted on You Tube by her father. Her ideas are no doubt influenced by her father as well.

Her speech is noteworth for the clarity of argument and being simple and straightforward. Grant points out that until the 1970''s the government borrowed money directly from the Bank of Canada. However now the government borrows from private banks and thus has to pay interest to them. Canadian taxpayers are thus having to paying interest on these loans for private banks' profit instead of borrowing directly from our own central bank. The reason for the change is obvious. It provides greater profit for private capital.

Grant's argument is not new. George Crowell writing for the Canadian Centre for Policy Alternatives last year argued that borrowing directly from the central bank “would make available tens of billions of dollars that are urgently needed to rebuild our public infrastructure, protect our environment, and strengthen Medicare and other social programs so vital in meeting human needs.” However it would not provide the banks more profits from interest!

Critics argue that the move would cause inflation as the government would print money whenever it liked. But was there greater inflation before the earlier practice was stopped? Imagine even a Green Party representative comes out for the bank ripoff. Ard Van Leeuwen a Green Party of Canada activist said:"At zero percent interest we would actually be subsidizing, and hence encouraging, government borrowing," So would that not be a good idea to encourage green energy projects? I have included the You Tube speech. See also this article.

Mark Carney: Excessive household debt could threaten economy

Mark Carney Bank of Canada governor said that if excessive household debt threatened the economy he would act. Ten per cent of Canadians could be unable to meet their mortgage payments if interest rates increased to more normal rates says Carney.

Carney remarked:"In exceptional circumstances, if there are issues that threaten financial stability, such as household debt ... the bank could use monetary policy for that purpose," Most economists think that the Bank of Canada will keep interest rates at one per cent for some time yet as the economic recovery remains fragile. However there were good job numbers for the month of March many times the predicted amount. Perhaps this indicates the economic recovery is being sustained. The interest rate at present is far below the inflation rate.

At present household debt is 150 per cent of income. Carney claims this is unsustainable. Carney said:"We have never been as indebted as we are today as individuals," If Carney does decide to raise interest rates this could cause problems for those barely able to pay their mortgages now. See this article for more.

Bank of Canada Governor: Europe situation will slow Canada's growth

  The governor of the Bank of Canada Mark Carney claims that the European debt crisis will slow both Canadian growth and global growth. Carney predicted that Canadian growth will be lower by approximately .6 per cent for the year. This will mean the Canadian GDP will be about 10 billion lower than otherwise.
    Carney decided that the Bank's key interest rate would remain at 1 per cent, a very low rate. As well he estimated that the debt crisis in Europe would lower the global growth rate by one per cent and growth in the U.S. economy by .8 per cent.
    As he has done earlier Carney warned about the high level of personal debt in Canada. This runs at about one hundred fifty per cent of personal income. Carney said:"High household debt levels in Canada could lead to a sharper-than-expected deceleration in household spending," "If there were a sudden weakening in the Canadian housing sector, it could have sizable spillover effects on other areas of the economy."
     Many think that the bank will not raise interest rates this year as long as the economy is sluggish and inflation low. But some analysts think that by the middle of next year there will be some hikes in the rates. For more see this CBC article.

Canadian debt goes up and net worth goes down

  Statistics Canada released figures showing that the net worth per household dropped by $4,600 (Canadian) last quarter mostly because of declines in the value of equities and pension assets. In spite of  relatively hard times Canadians have continued borrowing. Over a year the per capita debt has risen by $2,200 dollars to a total of $46,100. The total is a humongous 1 trillion dollars in mortgages plus another 448 billion in consumer credit.
    The governor of the Bank of Canada warned Canadians they must ease up on spending as the level of debt averages over 150 per cent of income as the most recent Statistics Canada figures show. Net household worth has been declining as debt has been increasing. In the third quarter of this year net household worth dropped 2.1 per cent. This is the second consecutive quarter in which net household worth has declined.
   Government debt has also been rising. In the second quarter government net debt was 46.3 of GDP but this last quarter was 46.9 per cent of GDP. This is still quite moderate compared to many countries. Canada's problems may be more with consumer debt. Consumers saddled with large debts in a sluggish or declining economy are not a recipe for growth or even social peace. For more see this article.

Harper stacks panel picking new Bank of Canada

Not much coverage of this by the Canadian media. I assume what Harper is doing is standard and not a Conservative Party first! This is unaccountability by stealth or dependant independence.

Harper Stacks Panel Picking New Bank of Canada Head (Update2)

By Greg Quinn

Aug. 30 (Bloomberg) -- Canadian Prime Minister Stephen Harper, who can't choose a new central bank chief himself, has done the next-best thing: stacked the panel that nominates David Dodge's successor.

Since taking office in 2006, Harper's government has replaced eight of 12 Bank of Canada board directors, instead of reappointing them when their three-year terms expired. New faces include William Black, a former official in the ruling Conservative Party's Nova Scotia branch, and Douglas Emsley, who worked for a Conservative premier of Saskatchewan.

The board and Harper may decide to restore a tradition of selecting one of the bank's five deputy governors, or they could pick an outsider, as the previous Liberal Party government did for the first time with Dodge. Reshaping the panel may help Harper ensure that the next steward of the world's eighth-largest economy shares his priorities on taxes and spending, as well as monetary policy.

``There would be hints and nudges and winks'' if the panel were looking at someone Harper opposed, said Tim O'Neill, principal of O'Neill Strategic Economics in Toronto, and a former chief economist at the Bank of Montreal. ``The board doesn't want to be put in the embarrassing position of putting forward a name, only to have the government come back and say that's not acceptable.''

Hints and Nudges

Most leaders have more than hints and nudges at their disposal. In the U.K., Japan and Australia, the government has free rein in the selection. The White House nominates the Federal Reserve chairman, though the Senate must approve the appointment. The president of the European Central Bank is appointed by European Union leaders and finance ministers.

In Canada, the board submits a candidate to the Cabinet for approval. Dodge, 64, retires Jan. 31 at the end of his first seven-year term. The central bank says his replacement may be named as early as mid-September.

Economists say the contenders include Senior Deputy Governor Paul Jenkins, 59; Deputy Governor Tiff Macklem, 46; Mark Carney, a 42-year-old finance ministry official; and Toronto-Dominion Bank Chief Economist Don Drummond, 53. None has said publicly whether he's interested.

Whoever is chosen will inherit an economy that's enjoying the lowest jobless rate in three decades and a surge in commodity prices that has pushed the nation's currency to the highest since the 1970s.

Inflation

At the same time, inflation has exceeded the bank's 2 percent target since March, prompting a July interest-rate increase. The bank says inflation will peak at 3 percent in the fourth quarter and stay above target until early 2009.

Harold MacKay, a Saskatchewan lawyer who headed the panel that chose Dodge, said governments try to respect the board's independence. Still, choosing nominees and ``identifying skill sets isn't done in a vacuum,'' he said.

Finance Minister Jim Flaherty, 57, is ``apprised'' during selection process ``to ensure there is agreement based on the short list of candidates established by the board,'' Chisholm Pothier, Flaherty's spokesman, said in an e-mail message. The government has ``discretion'' to replace board directors, he said, and chooses ``highly skilled and experienced'' people for the positions.

Black -- who joined the board last October -- headed the Maritime Life unit of Manulife Financial Corp., Canada's biggest insurer, until 2004 before leaving the company and eventually running to lead the Nova Scotia Conservative Party.

`Highly Decentralized'

John McCallum, the opposition Liberal Party's federal critic for financial affairs, said he didn't have any problems with the board appointments. Still, he said he will be monitoring the process for signs of excessive interference such as if ``the minister overruled the board.''

Speaking in Calgary today, Flaherty said he has no preferred candidate to replace Dodge.

The 48-year-old Harper will likely want someone who supports his key policies, such as giving more money and power to provincial governments -- or at least doesn't publicly oppose them.

``One of the keys to his decision, I think, will be whether the person he appoints will follow his ideological bent'' for ``a highly decentralized economic mechanism,'' Jerry Grafstein, a Liberal lawmaker who heads the Senate Banking Committee, said in an interview.

Dodge has commented on a wider range of policy issues than his predecessors, such as whether Canada's banks should be allowed to merge, raising the possibility the next governor may also be outspoken. The governor gave Harper a boost in February, telling a legislative hearing that an unpopular decision to tax income trusts for the first time fixed a ``bias'' in the tax system.

`Autonomous'

Harper hasn't spelled out how he may lean, and his office referred requests for comment to Flaherty's office. In a May 31 interview, the prime minister called the search ``autonomous'' and said governments in the past decade have backed the bank's goal of setting a numerical target for inflation.

``That's been an effective policy for the country,'' he said in the interview. ``We would want to take a look at what the views of a potential nominee would be in that regard.''

Views on inflation may have been deal-breakers in the past. John Crow, governor from 1987 to 1994, opted against seeking a second term early in Paul Martin's tenure as finance minister, hinting in a book it was because he wanted a tougher inflation target than Martin, who stayed on as minister until mid-2002.

No Big Changes

With the economy in the second-longest expansion since World War II, the best course would be to avoid anyone seeking big changes, said Christopher Ragan, a professor at McGill University in Montreal and a former adviser to the bank.

Staying the course would make Jenkins -- a 32-year central bank veteran -- the front-runner, said Warren Jestin, chief economist at Bank of Nova Scotia, Canada's second-largest lender.

Black didn't return a telephone message left by Bloomberg News, and Emsley declined to comment. Other board members declined comment or could not be reached.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net .

Last Updated: August 30, 2007 15:54 EDT