Sources inform ''Globes'' that the two members of the Bank of Israel Monetary Committee who voted against cutting the interest rate for October to 1% were senior advisor to the Governor Barry Topf and Prof. Reuben Gronau. The decision, one of the toughest the committee has made to date, was passed in a 3:2 vote, exposed the deep and principled divide in the opinions about the central bank's monetary policy.
Bank of Israel sources say that Topf and Gronau believe that the interest rate cut will not help stem the appreciation of the shekel, nor support the Bank of Israel's employment and growth goals, but that it will help inflate the real estate bubble. The committee meeting's minutes support this, saying that two members believe that the interest rate is bad for the economy, and ineffective in dealing with the exchange rate and real estate problem.
The sources added that Gronau, one of Israel's most highly esteemed economists, will stay on for another term four-year on the Monetary Committee through October 2017. The cabinet approved the extension last week, along with four-year extensions for two public members of the Bank of Israel Supervisory Committee, Ytzhak Edelman and Uri Galili, through 2017.
Topf, one of the strongest committee members and well known worldwide for the management of foreign currency reserves, will leave the Bank of Israel in a few weeks.
Gronau and Topf were the few Monetary Committee members to vote against former Governor of the Bank of Israel Stanley Fischer in the year prior to his resignation in June.
The Monetary Committee has six members, three from the Bank of Israel's management and three external members. Since Fischer's departure, it has had five members. Acting Governor Karnit Flug and Topf will leave soon. Three external members are Gronau, Prof. Alex Cukierman, and Prof. Rafi Melnick. Cuckierman and Melnick's terms have not yet been extended, and the next governor will apparently decide their fate.
The Bank of Israel, especially Fischer, has strongly opposed disclosing the identities of the voters in Monetary Committee decisions. When the committee was established, under the new Bank of Israel Law, "Globes" asked Fischer why he did not adopt the Federal Reserve Board's policy of disclosing the voters in its monetary decisions, given that non-disclosure affected transparency at the Bank of Israel. Fischer said that the Fed policy had both advantages and disadvantages, one of which was the risk that disclosure might affect a member's ability to speak freely in committee meetings.
Meanwhile, the Bank of Israel has not had a governor for 100 days, and Fischer's successor has not yet been named. Flug has been acting governor since Fischer left on June 30, and she will leave when his successor takes up office. The Turkel Committee approved three candidates for the post - Prof. Mario Blejer, Prof. Zvi Eckstein, and Victor Medina - in early September. Prime Minister Benjamin Netanyahu's aides say that a decision will be made when Minister of Finance Yair Lapid returns from the World Bank and IMF Annual Meeting in Washington.
The Bank of Israel has been suffering from a severe image crisis since Fischer's departure. At the administrative level, a series of articles by "Globes" has revealed a pension scandal, in which retirees will receive an average of NIS 4 million, and a NIS 177 million grandiose renovations plan for the headquarters building - a cost that does not include moving costs and the rent of a premises during the renovations.
Published by Globes [online], Israel business news - www.globes-online.com - on October 9, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013