Victor Halpert, head of the Israeli desk of the Salomon Brothers company, sharply attacked the Bank of Israel’s decision today to reduce the interest rate by 0.7%, one month after the rate was raised by 1.5%.
Halpert said that the position of Salomon Brothers is that the Bank of Israel has lost the overall strategy of its monetary policy and that it is being led rather than leading.
Halpert, whose comments exerts a significant effect on foreign investors operating in the Israeli market, said that Salomon Brothers was very disappointed by the “zigzag policies” of the Bank of Israel. In its estimation, the Bank has “lost direction” with regard to its monetary policy and is today one of the main causes of instability in the capital market.
According to Halpert, it was wrong to raise the interest rate by 1.5% a month ago, “because the 15.5% interest rate was high enough to combat inflation.”
“But after the mistake was already made, it was wrong to try and correct it by lowering the interest rate today,” he added.
“This is the 25th change of interest rate in the past 36 months,” said Halpert, “if the Governor of the Bank of Israel thinks he made a mistake, as he apparently did in many of the 24 recent interest rate changes, he should draw the (right) conclusions and go home.”
According to Halpert, “foreign investors will be in no hurry to return to a capital market in which the interest rate changes every day.”