In the wake of the Bank of Israel Monetary Committee's decision to leave the September interest rate unchanged at 0.1%, Governor Karnit Flug has expressed pessimism about the future on global markets. She told Channel 2, "It's hard to say that the market falls are over. The stock exchange is very volatile and it's premature to say that what we have seen so far is the end of the story."
Talking about the Bank of Israel's decision to "sit on the fence" and not cut interest rates she said, "In a situation which is unclear and there is extreme volatility, the right thing was to stop for a moment." However, she hinted that she does not rule out negative interest rates. "There are policies of negative interest rates and in certain circumstances it's an option to do that."
Speaking about the State budget, which is about to be approved she said, "I thought that the deficit is too high ……. The fact that we have high debt reduces the government's room for maneuver in situations like those we are seeing now."
Flug attacked Minister of Finance Moshe Kahlon's plan to let non-banking groups raise capital in order to provide loans to the public. "I'm in favor of reform of the financial system but it is important that it is done while maintaining stability and protecting the consumer. There is no need to look very far to understand what can happen if you open up to unfair competition for the consumer and don't maintain stability. I don't think we want to get to a sub-prime Israel. It's important that we do things in a responsible way."
Published by Globes [online], Israel business news - www.globes-online.com - on August 26, 2015
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