Last update - 00:00 10/02/2008
Fischer says he'll do everything possible to prevent recession
By Moti Bassok and Tal Levy, TheMarker
Bank of Israel Governor Stanley Fischer said Sunday morning he would not intervene in the currency market, but that the Bank of Israel and Finance Ministry would take every measure possible to prevent the Israeli economy from slipping into a recession.
Fischer made the comments at an impromptu press conference, which was held in response to a joint Manufacturers Association-Histadrut labor federation proposal calling for the Bank of Israel to lower the interest rate by 0.5 percent, despite Fischer's opposition to such a move.
If the governor was to lower interest rates, the shekel would immediately weaken and thus buttress Israel's export sector which has been bruised by the dropping dollar.
Shraga Brosh, president of Israel's Manufacturers Association and Histadrut labor federation Chairman Ofer Eini plan to collect signatures from dozens of MKs in support of legislation which would force Fischer to factor the status of labor and economic growth into his calculations, which currently focus solely on inflation.
Fischer, however, said he believes this is a misguided initiative: "We have to leave the agreements to make changes to monetary policy in the hands of the central bank, and must not transfer this to powerful interest groups in the economy."
The central bank governor added: "It needs to be clear that the Bank of Israel vigilantly follows every development in the market and the economy, and will give a monetary response to changing circumstances in order to prevent the Israeli economy from sliding into a recession - if indeed the United States' economy slips into one, after which the global economy will slow down."
Fischer said the central bank is tracking developments in export sector's profitability, but did not mention the matter of Israel's interest rate.
The economy's "problem," Fischer stated, was the fact that it is in good condition in absolute terms, and in a good ranking in reference with the world.
"There is huge flow of capital into the economy by foreign investors and Israelis who are returning their money home. With the economy's current rate of growth, we are passing beyond the definition of a developing economy into that of a developed one. We will see in this process the revaluation of the Shekel against the Dollar and the Euro," The central bank governor said.
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