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Former Goldman Sachs exec is new governor of Bank of Canada

Section: Daily Dispatches

By Bernard Simon
Financial Times, London
Friday, October 5, 2007

TORONTO -- Mark Carney was named Thursday as successor to David Dodge as governor of the Bank of Canada.

Mr Carney, 42, formerly a managing director in Goldman Sachs' Toronto office, is the latest in a string of investment bank alumni to occupy prominent policymaking positions around the world.

Others include Hank Paulson, the US Treasury secretary; Mario Draghi, governor of the Bank of Italy; and David Walton, a member of the Bank of England’s monetary policy committee.

Mr Carney, who holds a PhD in economics from Oxford University, is currently the Department of Finance's senior associate deputy minister, the third highest-ranking official. He was a Bank of Canada deputy governor in charge of international issues from 2003 to 2004.

Mr Dodge, 64, completes his seven-year term in January. He has won wide praise for helping to steer Canada to one of the industrial world’s highest growth rates while keeping inflation within reasonable bounds.

The "core" consumer price index -- which excludes energy, food, and other volatile items -- has recently strayed slightly above the central bank's 2 percent target, forcing the bank to raise the key overnight lending rate in July for the first time in a year.

But many economists are confident that inflation will soon retreat as the strong Canadian dollar brings down import prices.

Mr Dodge has also gained a reputation for being more approachable than many of his predecessors and breaking down the bank’s ivory-tower culture.

The Bank of Canada has recently faced the challenge of calming money markets in the wake of a crisis in the asset-backed commercial paper (ABCP) sector.

The ABCP market remains frozen as participants wrestle to convert outstanding holdings into medium-term instruments.

Mr Dodge said last week that the money markets were functioning more smoothly, but acknowledged they "are not yet back to normal." The bank has injected substantial amounts of extra liquidity into the market several times in recent days.

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