Fischer: ‘We’re buying time’

November 10, 2010 07:32

"We’re trying to moderate and give exporters time to streamline so they can export at a lower price and gain time to join growing countries."

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BOI Governer Stanley Fischer.

stanley fischer. (photo credit: Louise Green)

Bank of Israel Governor Stanley Fischer told the Knesset Finance Committee on Tuesday his interventions in the foreign-currency market were an effort to buy time.

“We’re intervening in the foreign- currency market because it sets the price and profit exporters get,” he said. “When there’s appreciation, it hurts exporters. There’s a global trend that the currencies of emerging economies suffer from appreciation, and it’s not possible to withstand this trend. But it is possible to ameliorate it. If we look at the appreciation here, we’ll see that it’s less than in Brazil or Australia.

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“What are we trying to do? We’re trying to moderate and give exporters time to streamline so they can export at a lower price and gain time to join growing countries. In effect, we’re buying time. The large interventions began two years ago, and without them the shekel would have appreciated much more.

It’s impossible to keep this up forever, but there’s a difference between two years and eternity.”

“Apartment prices rose much faster than rental prices,” Fischer said. “A gap has opened here, and we’re worried that rent could rise and start acting like apartment prices. Rent usually rises because of a rise in apartment prices.”

Regarding young couples’ hardship in buying an apartment because of soaring prices, he said: “Young couples in other countries do not normally buy an apartment. It’s different here because parents participate.

There’s also the question of who determines the need. If there are enough people who cannot buy, prices will fall.”

Addressing the problem of inflation, Fischer said: “Throughout the recession, high inflation was mostly due to the steady rise in home prices. Over the next 12 months, inflation is expected to be around the target’s midpoint of 2 percent, after which it will begin to rise, again because of housing. The market expects that only at the end of next year will inflation again come within the target range.”

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