Governor's foreword

The year 2020 was like no other. It began with the unemployment rate in Canada near an all-time low, inflation very close to its 2 percent target and the Bank of Canada’s policy interest rate at 1¾ percent. Canada’s economy was healthy. To use Governor Stephen Poloz’s words in the foreword of last year’s Annual Report, “the macroeconomy has made it home.”

A year later, we are far from home.

By February 2020, COVID‑19 was spreading globally, and in March, Canada went into a lockdown. Thanks to the collective efforts of so many—health care providers, first responders, essential workers, governments, business leaders and every Canadian who took public health guidance to heart—a much worse catastrophe was averted. Nevertheless, the human and economic costs of the pandemic have been severe, and it’s not over.

The COVID‑19 pandemic took the lives of more than 15,000 Canadians in 2020. And with the virus continuing to spread, more Canadians will get sick—some with devastating consequences. In the spring of 2020, the economy plunged into the deepest recession on record—putting more than three million Canadians out of work—and inflation fell to zero.

Since then, the economy has climbed a long way back from the very deep hole it was in. But the recovery remains very incomplete. At the end of 2020, rising infections and new lockdowns were poised to worsen the economic situation in early 2021, before the rollout of new vaccines allows for a gradual return to more normal activities sometime later in the year.

Tiff Macklem walking confidently into the House of Commons. Canadian flags line the hallway.

Tiff Macklem is named the new Governor of the Bank of Canada, succeeding Stephen S. Poloz (back, left). Governor Macklem assumed office on June 3, 2020. The announcement was made by then Minister of Finance, Bill Morneau, in the House of Commons on May 1, 2020.
Photo: Alex Tétreault / PMO/CPM

For the Bank, too, 2020 was a year like no other. Confronted by extraordinary circumstances, the Bank’s employees worked with speed, determination and commitment to fulfill our role as Canada’s central bank. In the first half of the year, I watched this work from outside with great admiration. Since assuming my role as Governor in June, I have been even more impressed and proud of everyone at the Bank.

Despite significant professional and personal challenges, the Bank’s dedicated employees delivered an array of programs and policies to support the economy and the financial system. As the crisis hit, the Bank worked quickly to analyze the economic fallout of COVID‑19 in Canada and around the world. Against a background of extreme uncertainty, that analysis drove our critical policy decisions. These included our deployment of unprecedented tools to keep markets functioning and credit available and then later to provide the monetary policy stimulus needed to support economic recovery.

To address critical liquidity shortfalls in the financial system, the Bank designed and implemented 11 exceptional programs, 8 of which were entirely new. These included the new Standing Term Liquidity Facility, purchase programs for corporate and provincial bonds, and our Government Bond Purchase Program.

To support confidence and provide monetary policy stimulus, the Bank’s Governing Council made three emergency interest rate cuts, bringing the policy interest rate to its effective lower bound. In July, the Council committed to keeping it there until economic slack is absorbed so that the inflation target is sustainably achieved. The Bank reinforced and supplemented this exceptional forward guidance with a commitment to continue its large-scale asset purchase program until the recovery is well underway. This program has been effective in making borrowing more affordable for households and businesses.

Tiff Macklem sitting comfortably in an easy chair. He is smiling and making a friendly hand gesture.

Governor Tiff Macklem talks about the conduct of monetary policy in the context of COVID‑19 during his first public speech, hosted by the Canadian Clubs and Cercles Canadiens. Watch it on YouTube (June 22, 2020).

To ensure Canadians had the cash they wanted to hold during this period of uncertainty, we also worked with financial institutions and supply chain partners to quickly deliver a record number of bank notes.

The Bank’s rapid deployment of emergency measures to support the economy and the financial system reflected the immense effort that went into the Bank’s COVID‑19 response. Our incident management framework helped leaders across the Bank adapt their operations to new health protocols and policy requirements. Thanks to the Bank’s robust technology infrastructure, we swiftly transitioned to mandatory remote work while safeguarding the Bank’s critical operations. We also used our risk management framework to identify risks and address them as they materialized. Clear, timely and comprehensive communications—both internal and external—supported these efforts.

Despite the obstacles that arose, we also continued to complete important work related to ongoing priorities.

To lay the groundwork for the 2021 renewal of the Bank’s inflation-targeting agreement with the Government of Canada, we conducted a review of alternative monetary policy frameworks, presented the results to a diverse group of experts and stakeholders, and published them online. We also engaged with Canadians to better understand their perceptions of inflation. We will publish the results of this engagement in 2021.

We continued our important work to provide Canadians with bank notes they can use with confidence and pride. As we did with the very successful $10 Viola Desmond bank note, we launched a nation-wide campaign to ask Canadians who they want to see honoured on the new $5 bank note. We received more than 45,000 submissions for the portrait subject and published the shortlist of finalists. We also continued preparing for the future of money. As shifts in how Canadians use physical cash continued—and were accelerated by the pandemic—we made progress on the policy and technical planning for a central bank digital currency as a contingency.

The Bank continued its work to understand the implications of climate change for the economy and the financial system to help players in our financial system prepare. The Bank was appointed to the steering committee for the international Network for Greening the Financial System, which means we will play an important role in guiding its direction. We also began work with the Office of the Superintendent of Financial Institutions to create scenarios to help financial institutions and insurers do comprehensive and comparable climate-related scenario tests. Meanwhile, we set targets to reduce greenhouse gas emissions from Bank buildings.

Confronted by extraordinary circumstances, the Bank’s employees worked with speed, determination and commitment to fulfill our role as Canada’s central bank.”

In 2020, we found ways to reach out to groups that we have not engaged with enough in the past, particularly Indigenous Canadians. And the Black Lives Matter movement was a stark reminder of the need for further action to combat racism in our institutions and to create a truly inclusive work environment. More generally, it is important that the Bank reflect the people we serve and consider all points of view in our work for Canadians. To help achieve that goal, we launched a new diversity and inclusion strategy, introduced targets to increase the representation of women and racialized groups among our senior officers, implemented anti-racism actions and introduced new bursaries for students in visible minority groups.

The Bank’s achievements in 2020, particularly its operational resilience and rapid emergency response, are due in large part to the leadership and investments of Governor Poloz and Senior Deputy Governor Carolyn Wilkins.

Governor Poloz was an exemplary leader during his seven years at the helm of the Bank. When the crisis hit, the Bank was able to respond with speed, scale and ingenuity. This was largely the result of the Governor’s risk management approach to monetary policy, his deep understanding of the Canadian business community and his commitment to developing leadership.

Senior Deputy Governor Wilkins, who departed in December, was instrumental in designing and implementing the Bank’s emergency response measures. Over her tenure, she made the Bank a world leader in fintech and digital currency research and used her formidable intellect and passion to champion economic research. And, as the Bank’s first female Senior Deputy Governor, she inspired a generation of women who now see macroeconomics, and the Bank, as a place for them.

On behalf of the Bank’s Board of Directors and staff, I want to thank Stephen Poloz and Carolyn Wilkins for their tremendous service to Canadians. I am proud to continue their work as I enter my first full year as Governor of this great institution. Canadians count on us to promote their economic and financial well-being. I know that no matter what 2021 brings, we will carry out that mandate with unwavering dedication.

Tiff Macklem