Governor of the Bank of Israel Stanley Fischer spoke today before an audience of 40 senior figures in the Israel economy, at a closed meeting held a Bar Ilan University in Ramat Gan. Among the participants were former Governor of the Bank of Israel Jacob Frenkel; Iscar president Stef Wertheimer, Amot Investments chairman Natan Hetz; Israel (Izzy) Borovich, who controls El Al; and Mivtach Shamir chairman and CEO Meir Shamir.
Fischer spoke about the global economic situation, the state of the Israeli economy, and the actions taken by the Bank of Israel and the Ministry of Finance to deal with both. He also commented on the sharp reductions in the central bank's interest rate that he has made in recent months. "The lower limit for the Bank of Israel's interest rate is 0%, as in the US," he said, hinting that he will be prepared to continue reducing interest rates should the situation demand it.
Asked why the interest rate cuts have failed to percolate through to the market, Fischer was as critical as on previous occasions, but pointed out that he had no power to intervene in the way the banking system conducted its affairs. "I have cut the interest rate to 1.75%, and the bank's interest rate spreads have only risen. Nevertheless, I have no intention of intervening in the way the banks manage risk."
Those present also asked how independent the Bank of Israel was in setting interest rates, and whether political pressures were being brought to bear on it in this respect. Fischer responded, "I have never received a phone call from a minister before or after an interest rate decision."
Fischer took the opportunity of once more praising the various measures introduced by the Ministry of Finance to cope with the crisis, including the fund for guaranteeing corporate bonds.
Published by Globes [online], Israel business news - www.globes.co.il - on January 1, 2009
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