"The Bank of Israel's future began yesterday, with the approval of the new Bank of Israel Law. I hope that the Knesset will soon pass the bill in its second and third readings and that it will come into effect," said Governor of the Bank of Israel Prof. Stanley Fischer today at the bank's annual conference at the Tel Aviv Hilton.
In a brief opening statement, Fischer listed his priorities at the Bank of Israel. "Our first challenge is to begin implementation of the new law and the system that it defines, in a way that will serve the State of Israel and the Israeli economy. We'll have to begin this almost immediately.
"The second challenge is clear to all of us: management of monetary policy on a path that emerges from the global financial and economic crisis."
Commenting on the possibility of a double-dip global recession, Fischer said, "The most likely scenario is that we're on the way out of the recession. Around the world, we're seeing slow growth rates, and there are differences between countries."
Fischer said that problems in Greece, and European efforts to help it, would result in very low growth rates in Europe over the coming years. "As for Israel, against this backdrop, we see this approach in monetary policy. We're in a gradual process of normalizing the interest rate aimed at getting inflation within the target range. We will base our policy on this objective as well as global economic growth."
Fischer thereby signaled that interest rate hikes in Israel will be linked to global interest rates, saying, "Interest rate hikes by the world's central banks will be in the background, as will changes in exchange rates. Nevertheless, there is nothing new to add to our previous announcements, but we cannot set an interest rate path that is not affected by what happens in the global arena."
As for intervention in the foreign currency market, Fischer said that his policy was straightforward. "A central bank in a small, open economy cannot be indifferent to developments. We can gradually scale back the need to intervene in the foreign currency market. This is our hope, but it strongly depends on what happens in the world."
Published by Globes [online], Israel business news - www.globes-online.com - on March 11, 2010
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