"Despite all our pride about Israel's fiscal discipline, there are alarming signs that this year's spending will increase by more than the 1.7%. We must avoid a situation in which the budget debt exceeds 6-6.5% of GDP, by one of two ways: either by raising taxes, or by cutting public sector salaries," said Governor of the Bank of Israel Prof. Stanley Fischer at the Globes Finance and Capital Market Conference in Tel Aviv today.
Fischer added, "The main tasks this year are especially arduous. The first task, to which every central banker is loyal, is to manage monetary policy, which contributes to economic health and growth, for the good of the country and the people of Israel in both the short and long term. Monetary policy is currently and properly expansionary, supporting economic policy and financial stability, provided that inflation expectations stay within the price stability target."
Fischer noted, "The second task, regrettably, is the same as it has been in the past four years: to pass a new Bank of Israel law. At the ceremony at the President's Residence, then-Prime Minister Ariel Sharon and then-Finance Minister Benjamin Netanyahu spoke about their intention to pass the law. The question that is asked is why there is a need for a new law: it is to ensure the independence of the central bank, to clearly define its functions, to maintain job growth, provided that these do not contradict the preservation of financial and price stability."
Commenting on policy moves of the past year, Fischer said, "The fact that there is an inflation target does not prevent you from contributing to all the government targets. The bank's responsibilities also have to be clearly defined; they are currently ambiguous. We also need public disclosure and transparency."
Commenting on the economy, Fischer said, "Inflation in April (which the Central Bureau of Statistics will publish on Friday) will be around 1%, the same as a year ago. However, we do not intend to overreact to a seasonal figure." The Consumer Price Index (CPI) rose by 1.5% in April 2008, the midpoint of the full-year 1-3% inflation target.
Fischer added, "Serving as the Governor of the Bank of Israel continues to be a rare right and great honor for me. In one year less 13 days, I will complete my (first) term as Governor of the Bank of Israel."
Published by Globes [online], Israel business news - www.globes-online.com - on May 13, 2009
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