Fischer says to keep expansionary policies
Bank of Israel governor tells The Wall Street Journal he's awaiting program from Netanyahu's new government, adds ''we're not going to take off rapidly until the rest of world's economy starts making comeback'
Bank of Israel Governor Stanley Fischer plans to continue expansionary monetary policies for the time being and is awaiting a program from Benjamin Netanyahu's new government to stimulate the economy, he said in an interview published on Wednesday.
Netanyahu, who took over as Israel's prime minister on Wednesday, has promised measures such as tax cuts to boost the economy, which the central bank believes is in a recession.
'We're doing very expansionary things now, and we're going to have to be prepared to undo them when the economy starts recovering,' Fischer said in an interview with The Wall Street Journal.
The Bank of Israel has lowered short-term borrowing costs by 3.75 percentage points since last October to a record low of 0.5 percent in an effort to spur growth.
With short-term rates so low, the central bank in mid-February also started buying government bonds in a bid to lower long-term rates that more directly impact consumer loans.
'Determining the way ahead'
It bought a small amount the last two weeks of February but said last week it planned to buy an average of 200 million shekels ($47 million) a day to a total of 15-20 billion shekels.
The Bank of Israel's moves came as Israel's political system has been focused on new elections the past few months. As a result, fiscal measures have been limited.
'We've had this period between governments in which we're waiting for the new government to present its plans, and what precisely they'll come up with will be very important in terms of determining the way ahead,' he said.
As finance minister from 2003 to 2005, Netanyahu won praise from investors for enacting a series of free market reforms that helped boost Israel's economy to growth of 5 percent a year between 2004 and 2007.
But the economy started to weaken on the heels of a worldwide downturn, weighed down by falling exports - nearly half of Israel's economic activity.
Fischer said Israel's economy will turn around only once the global economy recovers.
'We're not going to take off rapidly until the rest of the world's economy starts making a comeback,' he said.
The Bank of Israel forecasts a contraction of 1.5 percent for Israel in 2009.
