stanley fischer 311.
(photo credit: Courtesy)
The Bank of Israel indicated on Sunday that it will need to intervene by
continuing to raise interest rates and taking additional measures if housing
starts do not increase and property prices continue to rise.
economy is in good shape, but we are facing a world economy which is in a very
complicated situation and therefore we need to refrain from complacency,” Bank
of Israel Governor Prof. Stanley Fischer said at a press conference in Jerusalem
on Sunday, ahead of the annual meeting of the International Monetary Fund in
“The economy grew at 4.6 percent in the second quarter of the
year, unemployment has come down to almost the level before the global crisis,
to 6.2%, and inflation over the past 12 months has moved to the middle – 1.8% –
of the price stability target range [1% to 3%].
However, there is a sharp
increase in the cost of housing, and apartment prices are rising, which is
having an impact on the consumer price index,” he said.
that although there was a slowdown in the rate of increase in housing prices,
according to the most recent data from June and July compared with previous two
months, and a rise in housing starts, the central bank will continue to closely
watch developments in the market and intervene if necessary.
enough examples of crises that began in the housing market, and we will not let
it happen in Israel,” he said. “There are initial signs that housing prices are
starting to stabilize, but there needs to be a change in the supply side,
otherwise it is a problem. If there is no change and housing starts do not
continue to rise, the central bank will need to intervene and take additional
steps. We prefer the solution to come from the supply side, but if it does not
happen we have the tools to cope with the problem from the demand
Fischer indicated that if property prices continue to rise, the
central bank will continue to raise interest rates accordingly. Last week, he
raised the benchmark interest rate for October by 0.25% to 2%.
increased efforts by the government in recent months to boost the supply of
housing through the publication of construction tenders for thousands of
apartments, the decline in the pace of the sharp increase in prices has been
fairly moderate. Over the past year, property prices have gone up by more than
In a review of Israel’s economy in light of developments in the
global economy, Fischer added that the government’s budget deficit is estimated
to reach 4% of GDP or perhaps a bit less.
“The data are very positive, in
particular when compared with the global economy. The central bank’s companies’
survey also points to continued growth in the third quarter of this year, and on
this basis we raised our 2010 growth forecast to 4%,” Fischer said.
regard to 2011, the central bank last week cut its growth forecast for the
economy to 3.8% from 4% in reaction to lower growth forecasts in the US and
“It is a small difference,” Fischer said. “There is a lot of
uncertainty about the direction of the global economy.
We have not yet
completely gotten over the crisis. The environment is not back to pre-crisis
levels and does not compare to what it was three or four years ago. In the US,
growth is very moderate, and in Europe growth is expected to be slower than
Therefore we can not say whether our situation will continue
to be as good as it is today.”